- Location
- Bury St Edmunds, Suffolk
Supermarket specification, which was adopted by the UK’s principal retailers immediately after the horsemeat scandal, continues to dominate the interface between finishers and processors in the UK and the Republic of Ireland (RoI).
It covers commercial cattle and demands UK-origin, Red Tractor credentials, UTM, EUR3-4L classification, carcase weights of 280-380 kilos for steers and heifers as well as a maximum of four farm movements. Asda buys young bulls up to 16 months.
Its immediate impact has been to create a two-tier commercial market with non-supermarket specification cattle heavily discounted – unless they are sold to a buyer who prefers cattle of non-supermarket type.
However this tiering, which can be the equivalent of £200-£300 a head , has created unexpected problems – and may, along with the weak euro, be the core reason for the recent crash in prime cattle averages in Northern Ireland and on-going pressure on the GB market too.
Processors must sell cuts taken from supermarket specification cattle that are superfluous to supermarket requirements to other customers.
But because export markets able to purchase high specification beef at UK prices have still to be opened they take substantial losses after selling it at discount either to EU customers who have access to much cheaper beef – or outlets within the UK itself where supermarket specification has no value.
This points to the unusually wide price gap between top tier (supermarket) commercial cattle and those in the second tier continuing until processors contracted to supermarkets can balance their carcases more easily by selling surplus beef into equally high priced, or even higher priced, markets like the United States and China.
Regrettably for the stability of the UK industry those opportunities are still some way off – although they are moving closer.
In the meantime the UK’s prime cattle market may be more precisely tiered than it has ever been before.
Retail scheme cattle continue to occupy the top level. These include organic and breed specific supply streams – the latter dominated by Angus, then Hereford, and Beef Shorthorn.
However placing commercial (non-scheme) cattle, which account for the bulk of output, has become more complicated.
It could be argued that PGI qualified stock (Scottish, Welsh and West Country) occupy the high ground – although it is clear that the premium on PGI cattle in Scotland no longer soars above prices offered for supermarket-spec cattle in England and Wales as high as it has in the past.
At the same time it is obvious that supermarket specification cattle occupy the top commercial tier in England, Northern Ireland and Wales.
One of its specifications is less than four farm residencies because retailers have concluded that cattle which have been putting on flesh and then move onto a non-finishing diet produce gristle instead of muscle which undermines eating quality.
They believe this is more likely to happen to cattle that move between more than four farms. McDonalds and Burger King are among the companies which prefer their mincing beef to be taken from cattle that have grown evenly throughout their lives because it is more likely to be gristle free.
A maximum or four farms/residencies can be mistakenly interpreted as a maximum of four movements.
This is not the case. Movements through auction markets are not counted. Nor are movements to land under the same ownership.
It is possible that a super-supermarket spec, backed by super-prices, may eventually evolve which would demand commercial (non-scheme) cattle under 24 months with carcases weighing 320-350kg.
If this ever was adopted it would continue to cover commercial cattle and not slower growing native breeds – all of which could expect to be traded at their current premia through regular multiple retail outlets and other niche markets.
The second commercial cattle tier includes all non-assured animals and all purebred dairy bulls and steers as well as more typically bred underweight/overweight stock that is either under or overfinished.
Many of these can be sold through auction markets to specialist buyers who are looking for cattle which fit their own specification – which can be very different from that demanded by processors contracted to supermarkets.
Others can be contract slaughtered on behalf of specialist retail outlets which prefer beef taken from a particular cross or an unusually light/heavy carcase.
In general second tier cattle command prices substantially lower than those paid for supermarket specification stock.
At the end of March most of those sold deadweight traded against an R base of 320p compared with 340p-355p for supermarket spec stock offered in in England and Wales and 355p-360p for PGIs in Scotland.
The impact of supermarket specification on beef trading and the ex-farm price of slaughter cattle has been discussed in the Northern Ireland Assembly by the Committee for Agriculture and Rural Development and the Northern Ireland Meat Exporters Association (NIMEA) which represents processors.
The conversation, which took place on February 24th and is recorded in Hansard, highlighted the pressures faced by slaughterers trading beef taken from cattle that had not met specification and also the cost problems created by selling beef, mainly manufacturing cuts, which were superfluous to supermarket requirements but had nevertheless been purchased at top tier prices.
The committee was told that cattle resident on more than four farms, or were not farm assured, could be de-valued by up to £300 a head.
Indeed NIMEA informed the committee that every beef animal failing to meet supermarket spec, for whatever reason, faced a price reduction of up to £300.
Northern Ireland’s parliamentarians heard that retailers began to demand supermarket specification cattle as soon as it became obvious that consumer confidence in British beef had been undermined by the horsemeat scandal.
The surge in confidence created by the new spec at retail level then helped to lift the value of qualifying cattle to record levels.
However processors have since found it difficult to dispose of surplus top-tier beef though non-supermarket outlets – including EU export markets – without having to drop the price down to second tier levels
This means selling the beef off at the same price as beef taken from out of spec cattle that could be £200-£300 a head cheaper.
NIMEA representatives also confirmed that farm assurance qualification which had been running at 92-94 per cent in Northern Ireland before supermarket-spec was adopted jumped to more than 99 per cent in a matter of weeks.
It was clear that while processors recognised it was impossible to trade with UK supermarkets unless they met their demands there was nevertheless a downside when it came to trading unwanted supermarket-spec beef (mainly manufacturing cuts) into the UK – where it competed with beef taken from similarly discounted second tier stock - or in the EU where prices were established by trading against much cheaper beef from Poland.
They spoke of markets other than those established by mainline domestic retailers as secondary and insisted that beef which could not be sold into these markets had to go to Europe and compete with its much lower priced beef instead.
“So, if we have a product that does not meet the core specification requirements of the major retailers and burger manufacturers, it is, in effect, going into the second tier, which is the market that we are going head to head with in Europe,” the committee was told.
“The multiple retailers and the food service companies have set a specification we have to adhere to if we want to do that business”
“We could say we do not want that business but the point we have been trying to make today is that the alternative markets are so far adrift of the prime or top market we do not have a choice. We have to do whatever it takes to get into the premier or top markets.”
Most professional finishers have reacted phlegmatically. They recognise that UK prices are still well ahead of those elsewhere in the EU and expect the two tier market for commercial cattle to continue to develop.
Many are far from overjoyed that so many cattle that used to command top tier prices have fallen into the second tier but accept that these new rules have been put in place by the buyer and he who pays the piper calls the tune.
They also hope that retail demands for supermarket specification will not waver so both breeders and feeders can feel confident about turning out stock that hit the targets – and eventually less out of spec store cattle come through.
Recent calculations indicate that prime cattle sales through auction marts account for 13-14 per cent of British slaughterings – assuming that all cattle presented are purchased for immediate processing and none are picked up by feeders for further finishing.
AHDB estimated that prime cattle slaugtherings in Great Britain over w/e 21st March at 31,300 head and that same week Farmers Weekly records that 4,278 prime cattle were traded under the hammer.
Exactly 62 markets sold stock and the average number on offer was 69. However five centres recorded just one entry and only Darlington (229), Ludlow (272), Newark (283), Selby (294), and Thirsk (233) – all of them in England – sold more than 200.
Ten markets sold between 100-200 head and just one of these (Mold) was in Wales. None were in Scotland.
These figures can be checked against the most recent FW reports and AHDB’s latest slaughter figures.
It is significant that there have been calls in the Republic of Ireland (RoI) for a re-examination of the advantages of turning out beef cattle which meet retail specification.
The Irish Farmers Journal has told its readers – “We can either ignore market specs and hope for the best or start to move towards breeding and finishing systems which accurately reflect market demand.”
In an editorial published on April 10th the IFJ explains that finishers can no longer simply turn out cattle and expect someone else to make the best of them – a habit that had developed on the back of subsidy funded intervention purchasing and the export of huge quantities of surplus beef to non-EU countries under the cash heavy export-refund system..
A limit on carcase weights was identified as the biggest point of difference between Irish farmers and the processor/retail alliance which has underlined the £3 kilo value differential between steaks taken from a “perfect” supermarket carcase weighing 340kg-360kg and those taken from a much heavier/lighter animal.
The newspaper proposed that a positive approach to cross-industry re-examination of the grid based deadweight payments which currently outline bonuses and penalties against outdated market specifications should be taken.
And a new grid constructed which took account of the range of UK, EU and other markets available to the RoI - and which accurately framed the differentials in comparative carcase value.
The IFJ also suggested that the EUROP grid, which focused on the hindquarter was out dated because retail demand for roasts and other round cuts was retreating.
And that Ireland should move towards payments based on carcase meat yield assessment (presumably through Video Image Analysis) and the need for lighter carcases.
It emphasised that more retail customers wanted beef taken from younger cattle slaughtered at lighter weights and that big rumps were no longer necessary.
And in view of this backed a shift to national breeding policies and finishing systems that were more in tune with the direction of market demand.
(Robert Forster produces a weekly Beef Industry Newsletter. It can be found on the www.rforster.com website. Access is by subscription only. If TFF members email [email protected] they can be sent a complimentary copy of the latest issue.)
It covers commercial cattle and demands UK-origin, Red Tractor credentials, UTM, EUR3-4L classification, carcase weights of 280-380 kilos for steers and heifers as well as a maximum of four farm movements. Asda buys young bulls up to 16 months.
Its immediate impact has been to create a two-tier commercial market with non-supermarket specification cattle heavily discounted – unless they are sold to a buyer who prefers cattle of non-supermarket type.
However this tiering, which can be the equivalent of £200-£300 a head , has created unexpected problems – and may, along with the weak euro, be the core reason for the recent crash in prime cattle averages in Northern Ireland and on-going pressure on the GB market too.
Processors must sell cuts taken from supermarket specification cattle that are superfluous to supermarket requirements to other customers.
But because export markets able to purchase high specification beef at UK prices have still to be opened they take substantial losses after selling it at discount either to EU customers who have access to much cheaper beef – or outlets within the UK itself where supermarket specification has no value.
This points to the unusually wide price gap between top tier (supermarket) commercial cattle and those in the second tier continuing until processors contracted to supermarkets can balance their carcases more easily by selling surplus beef into equally high priced, or even higher priced, markets like the United States and China.
Regrettably for the stability of the UK industry those opportunities are still some way off – although they are moving closer.
In the meantime the UK’s prime cattle market may be more precisely tiered than it has ever been before.
Retail scheme cattle continue to occupy the top level. These include organic and breed specific supply streams – the latter dominated by Angus, then Hereford, and Beef Shorthorn.
However placing commercial (non-scheme) cattle, which account for the bulk of output, has become more complicated.
It could be argued that PGI qualified stock (Scottish, Welsh and West Country) occupy the high ground – although it is clear that the premium on PGI cattle in Scotland no longer soars above prices offered for supermarket-spec cattle in England and Wales as high as it has in the past.
At the same time it is obvious that supermarket specification cattle occupy the top commercial tier in England, Northern Ireland and Wales.
One of its specifications is less than four farm residencies because retailers have concluded that cattle which have been putting on flesh and then move onto a non-finishing diet produce gristle instead of muscle which undermines eating quality.
They believe this is more likely to happen to cattle that move between more than four farms. McDonalds and Burger King are among the companies which prefer their mincing beef to be taken from cattle that have grown evenly throughout their lives because it is more likely to be gristle free.
A maximum or four farms/residencies can be mistakenly interpreted as a maximum of four movements.
This is not the case. Movements through auction markets are not counted. Nor are movements to land under the same ownership.
It is possible that a super-supermarket spec, backed by super-prices, may eventually evolve which would demand commercial (non-scheme) cattle under 24 months with carcases weighing 320-350kg.
If this ever was adopted it would continue to cover commercial cattle and not slower growing native breeds – all of which could expect to be traded at their current premia through regular multiple retail outlets and other niche markets.
The second commercial cattle tier includes all non-assured animals and all purebred dairy bulls and steers as well as more typically bred underweight/overweight stock that is either under or overfinished.
Many of these can be sold through auction markets to specialist buyers who are looking for cattle which fit their own specification – which can be very different from that demanded by processors contracted to supermarkets.
Others can be contract slaughtered on behalf of specialist retail outlets which prefer beef taken from a particular cross or an unusually light/heavy carcase.
In general second tier cattle command prices substantially lower than those paid for supermarket specification stock.
At the end of March most of those sold deadweight traded against an R base of 320p compared with 340p-355p for supermarket spec stock offered in in England and Wales and 355p-360p for PGIs in Scotland.
The impact of supermarket specification on beef trading and the ex-farm price of slaughter cattle has been discussed in the Northern Ireland Assembly by the Committee for Agriculture and Rural Development and the Northern Ireland Meat Exporters Association (NIMEA) which represents processors.
The conversation, which took place on February 24th and is recorded in Hansard, highlighted the pressures faced by slaughterers trading beef taken from cattle that had not met specification and also the cost problems created by selling beef, mainly manufacturing cuts, which were superfluous to supermarket requirements but had nevertheless been purchased at top tier prices.
The committee was told that cattle resident on more than four farms, or were not farm assured, could be de-valued by up to £300 a head.
Indeed NIMEA informed the committee that every beef animal failing to meet supermarket spec, for whatever reason, faced a price reduction of up to £300.
Northern Ireland’s parliamentarians heard that retailers began to demand supermarket specification cattle as soon as it became obvious that consumer confidence in British beef had been undermined by the horsemeat scandal.
The surge in confidence created by the new spec at retail level then helped to lift the value of qualifying cattle to record levels.
However processors have since found it difficult to dispose of surplus top-tier beef though non-supermarket outlets – including EU export markets – without having to drop the price down to second tier levels
This means selling the beef off at the same price as beef taken from out of spec cattle that could be £200-£300 a head cheaper.
NIMEA representatives also confirmed that farm assurance qualification which had been running at 92-94 per cent in Northern Ireland before supermarket-spec was adopted jumped to more than 99 per cent in a matter of weeks.
It was clear that while processors recognised it was impossible to trade with UK supermarkets unless they met their demands there was nevertheless a downside when it came to trading unwanted supermarket-spec beef (mainly manufacturing cuts) into the UK – where it competed with beef taken from similarly discounted second tier stock - or in the EU where prices were established by trading against much cheaper beef from Poland.
They spoke of markets other than those established by mainline domestic retailers as secondary and insisted that beef which could not be sold into these markets had to go to Europe and compete with its much lower priced beef instead.
“So, if we have a product that does not meet the core specification requirements of the major retailers and burger manufacturers, it is, in effect, going into the second tier, which is the market that we are going head to head with in Europe,” the committee was told.
“The multiple retailers and the food service companies have set a specification we have to adhere to if we want to do that business”
“We could say we do not want that business but the point we have been trying to make today is that the alternative markets are so far adrift of the prime or top market we do not have a choice. We have to do whatever it takes to get into the premier or top markets.”
Most professional finishers have reacted phlegmatically. They recognise that UK prices are still well ahead of those elsewhere in the EU and expect the two tier market for commercial cattle to continue to develop.
Many are far from overjoyed that so many cattle that used to command top tier prices have fallen into the second tier but accept that these new rules have been put in place by the buyer and he who pays the piper calls the tune.
They also hope that retail demands for supermarket specification will not waver so both breeders and feeders can feel confident about turning out stock that hit the targets – and eventually less out of spec store cattle come through.
Recent calculations indicate that prime cattle sales through auction marts account for 13-14 per cent of British slaughterings – assuming that all cattle presented are purchased for immediate processing and none are picked up by feeders for further finishing.
AHDB estimated that prime cattle slaugtherings in Great Britain over w/e 21st March at 31,300 head and that same week Farmers Weekly records that 4,278 prime cattle were traded under the hammer.
Exactly 62 markets sold stock and the average number on offer was 69. However five centres recorded just one entry and only Darlington (229), Ludlow (272), Newark (283), Selby (294), and Thirsk (233) – all of them in England – sold more than 200.
Ten markets sold between 100-200 head and just one of these (Mold) was in Wales. None were in Scotland.
These figures can be checked against the most recent FW reports and AHDB’s latest slaughter figures.
It is significant that there have been calls in the Republic of Ireland (RoI) for a re-examination of the advantages of turning out beef cattle which meet retail specification.
The Irish Farmers Journal has told its readers – “We can either ignore market specs and hope for the best or start to move towards breeding and finishing systems which accurately reflect market demand.”
In an editorial published on April 10th the IFJ explains that finishers can no longer simply turn out cattle and expect someone else to make the best of them – a habit that had developed on the back of subsidy funded intervention purchasing and the export of huge quantities of surplus beef to non-EU countries under the cash heavy export-refund system..
A limit on carcase weights was identified as the biggest point of difference between Irish farmers and the processor/retail alliance which has underlined the £3 kilo value differential between steaks taken from a “perfect” supermarket carcase weighing 340kg-360kg and those taken from a much heavier/lighter animal.
The newspaper proposed that a positive approach to cross-industry re-examination of the grid based deadweight payments which currently outline bonuses and penalties against outdated market specifications should be taken.
And a new grid constructed which took account of the range of UK, EU and other markets available to the RoI - and which accurately framed the differentials in comparative carcase value.
The IFJ also suggested that the EUROP grid, which focused on the hindquarter was out dated because retail demand for roasts and other round cuts was retreating.
And that Ireland should move towards payments based on carcase meat yield assessment (presumably through Video Image Analysis) and the need for lighter carcases.
It emphasised that more retail customers wanted beef taken from younger cattle slaughtered at lighter weights and that big rumps were no longer necessary.
And in view of this backed a shift to national breeding policies and finishing systems that were more in tune with the direction of market demand.
(Robert Forster produces a weekly Beef Industry Newsletter. It can be found on the www.rforster.com website. Access is by subscription only. If TFF members email [email protected] they can be sent a complimentary copy of the latest issue.)
