- Location
- Bury St Edmunds, Suffolk
Supermarket demands already drive top commercial cattle prices and will soon include whole of life farm assurance too.
Critics of the adoption of whole of life assurance for beef cattle blame suited men in supermarkets for creating what they see as a problem at farm yard level – and have made no secret of their distaste for this retail led intervention.
However they have overlooked the benefits of the newly created UK supermarket specification for prime cattle, which first and foremost demands assured cattle of UK origin, on ex-farm prices and ignored the impact it has already had on regional pricing structures.
Indeed there is an irony that the UK region that objects most loudly to whole of life assurance, South West England, would be likely to benefit most from whole of life cover – and that farmers’ representatives in the region that has enjoyed the biggest price lift since supermarket specification was adopted, Northern Ireland, have objected to whole of life assurance too.
The creation of supermarket specification by retailers and mainline processors after the January 2013 horsemeat scandal marked a watershed in prime cattle purchasing in the UK the implications of which many feeders and finishers, as well as organisations that represent them, have still to grasp.
Essentially it means that feeders who produce commercial suckler or dairy cross steers and heifers (not scheme cattle like Herefords or Angus) will make most money if the cattle they present to processors contracted to supermarkets are UK-origin, farm assured, UTM, deliver carcases weighing 280kg-380kg, classify E, U. R, 3, 4L and O+3/4L and have not moved through more than four farms. Some young bulls can qualify if they are sold before they are 16 months old.
There is nothing remarkable about these animals - apart from the fact they account for almost all the non- speciality (not Angus, organic etc) stock processed by mainstream companies, which include ABP, Dawn, 2Sisters, Dunbia, Woodheads, Foyle, Scotbeef, or Dovecote Park, and command higher prices than similar commercial stock sold to other companies
Just 18 abattoirs account for 65 per cent of GB’s cattle kill.
There are of course other outlets but they are minor in comparison. In 2012 the GB-wide Cattle Health and Welfare Group (CHAWG) confirmed that just nine abattoirs, each killing over 50,000 cattle a year, averaged 72,388 head and accounted for 41.86 per cent of GB throughput.
Furthermore another nine abattoirs processed between 30,000-50,000 cattle a year, averaged 40,739 head and handled 23.56 per cent of the GB kill.
This means that only 18 abattoirs, most of them owned by just six companies, processed 65 per cent of GB’s cattle.
These figures include some cows but the message is that supermarkets, which dominate fresh beef sales in the UK are themselves served by only a handful of processing companies – each of which demands supermarket specification cattle so it can meet its supermarket customer’s orders.
These demands are real. Feeders who filter out of specification cattle (usually overweight, over finished, or poor confirmation) into their deliveries are heavily penalised and should an animal that is not farm assured turn up in the lairage the penalty is anything from 30p-70p a carcase kilo - and in some cases no payment at all.
The move to supermarket specification began after January 2013 when supermarket demands that their contracted processors pay even more attention to the origin and provenance of the cattle they handled were fuelled by fear of the discovery of even more horsemeat in mince.
Then they were refined by processors themselves at the peak of the 2014 prime cattle price plunge after they conceded they were hoisting too much unnecessary cost on their operations by purchasing cattle they did not want and then burdening themselves with avoidable expense when selling off this beef at a huge discount through the secondary wholesale system.
More medium sized cuts off medium sized cattle needed for multiple retailers.
Over 2013 and early 2014 supermarket demands for tightly specified carcases increased. They wanted more medium sized, medium priced, cuts off medium sized cattle but more than anything else they wanted to avoid being caught out by something (like horsemeat) which could undermine both their reputation and their sales.
Their answer was to work through the shortest possible supply chain – and for the majority that meant concentrating exclusively on tightly specified cattle of UK origin whose beef could be sold under a British label.
These buyers include Morrisons/Woodheads, Waitrose/Dovecote Park, Aldi/ABP, M&S, the Co-op and Lidl.
Tesco, Asda, and Sainsburys, which alone among the UK’s multiples buy beef from the Republic of Ireland (RoI), reacted by buying less and also by keeping their Irish supply chains as tight as possible by insisting they would only purchase beef taken from cattle that their contracted suppliers had bought and processed themselves.
To protect themselves further all the supermarkets, whether they bought only UK origin beef or included some from the RoI, demanded it was taken only from assured cattle.
Retailers concentrating on UK-only beef fared best because UK consumers overwhelmingly prefer UK-processed beef sold in packs carrying the Red Tractor label and are not obviously impressed with RoI beef – even if it carries Irish Quality Assurance Scheme (QAS) credentials.
Just 18 per cent of imported Irish beef sold through supermarkets
Nothing has happened since to soften this determination. Indeed it is estimated that less than 18 per cent of beef imported from the RoI into the UK is sold through supermarkets.
Processors made their move to reinforce UK-origin, farm assurance, and tight specifications in mid-2014 when they realised that one of the reasons they were paying so little for UK-produced cattle was that they were wasting money buying too many they did not want.
The main reason for the crash in the market was a simultaneous over-supply of cattle in the UK and the RoI but processors, who were worried that unusually low prices were endangering long term supplies, realised they could pay more for the cattle they did want, and therefore give more encouragement to on-going deliveries, if they refused to handle cattle that were outside their specification.
This meant taking a tougher approach with suppliers. Until then it had been practice for feeders to include stock, like an awkwardly shaped dairy cross or a steer that was marginally overweight, in the load.
And this was accepted by buyers who until then had considered the cost and effort of re-distributing non-supermarket specification beef at discounts of up to 30 per cent was justified if it meant a regular supplier was more likely to continue to send cattle to them and not to a competitor.
But from June 2014 this was no longer the case. Penalties for non-supermarket specification cattle became so extreme they were no longer worth sending in and regular suppliers were told that the tolerance on out of spec cattle in a load was just five per cent when previously it may have been 20 or even 30.
As a result feeders drew their cattle more carefully, purchased their replacements more carefully, and processors with supermarket contracts were able to pay more than they otherwise would have done for in-specification cattle because they were not wasting money elsewhere.
UK prime cattle enjoy the highest price in Europe by a country mile.
Another result is that the UK’s prime cattle continue to enjoy the highest price in Europe by a country mile with commercial steers and heifers currently selling for around £180 and £160 a head more than similar cattle from the RoI.
A recent cross-EU price comparison on R3 heifers (all types including organic and Angus) confirmed a British average of 366p and a Northern Ireland average of 359p compared with an EU average of 300p and an RoI average of 312p.
What this list does not show is that the Northern Ireland average has improved dramatically since British supermarket purchasing concentrated more heavily than it had done on UK-origin cattle carrying Red Tractor credentials.
As recently as 2013, before demand for assured cattle of UK origin strengthened, Northern Ireland’s average invariably hung mid-way between GB and the RoI while the regional price table within GB was, as usual, headed by Scotland, followed by the North of England, the English Midlands and Wales, and finally the South of England.
This situation is outlined in the table covering the average prices for R4L steers (including Angus, organic and other scheme cattle) recorded over w/e May 11th 2013 which is printed immediately below.
Region
Price
Scotland
412p
North of England
409p
Midland and Wales
396p
South of England
394p
Northern Ireland
378p
However after supermarket demand focussed even more heavily on assured UK-origin steers and heifers the Northern Ireland average leaped into third position leaving the South of England trailing in bottom place.
This fundamental shift, and its far reaching implications, are confirmed by the regional R4L steer averages recorded over w/e December 27th 2014 which are printed immediately below.
Region
Price
Scotland
376p
North of England
370p
Northern Ireland
361p
Midland and Wales
357p
South of England
354p
There will always be variations but a primary feature of post horsemeat scandal trading, and retail/processor concentration on assured UK-origin prime cattle has been a surge in Northern Ireland values because the determined search for fully specified supermarket cattle extended to all parts of the UK.
Supermarket concentration on farm assurance not expected to relax.
Also important to note is that supermarket concentration on farm assurance is not expected to relax because the multiples are keen to do all they can to make sure they do not fall foul of the newly installed Groceries Supply Code of Practice (GSCOP) - which is yet another strategy that has been introduced to reinforce food chain integrity after the horsemeat scandal.
It is policed by Groceries Adjudicator, Christine Tacon, and supermarket bosses have reacted by shortening as many supply chains as possible, not just meat’s, and bolstering their insistence on product provenance – which in the case of beef means farm assurance.
Or to be more exact – whole of life assurance.
It is indeed a retail approved move – although it is also backed by the Farm Animal Welfare Committee, the Food Standards Agency, the big beef processors and many others, including farmers, who believe that beef is a food, and its production, like that of other foods, should be scrutinised and certificated.
This being the case suckled calf breeders, and dairy beef rearer/feeders should be able to sell more cattle for more money than they would otherwise have been able to if they invest in a Red Tractor certificate and reinforce the drive for regular and reliable supplies of UK-origin, whole of life assured, supermarket-specification, commercial cattle.
They will deny themselves the opportunity to increase their incomes if they do not.
(Robert Forster produces Beef Industry Newsletter, which is the best single source of beef industry information available in the UK. It includes an informed, prime cattle price forecast and 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.)
Critics of the adoption of whole of life assurance for beef cattle blame suited men in supermarkets for creating what they see as a problem at farm yard level – and have made no secret of their distaste for this retail led intervention.
However they have overlooked the benefits of the newly created UK supermarket specification for prime cattle, which first and foremost demands assured cattle of UK origin, on ex-farm prices and ignored the impact it has already had on regional pricing structures.
Indeed there is an irony that the UK region that objects most loudly to whole of life assurance, South West England, would be likely to benefit most from whole of life cover – and that farmers’ representatives in the region that has enjoyed the biggest price lift since supermarket specification was adopted, Northern Ireland, have objected to whole of life assurance too.
The creation of supermarket specification by retailers and mainline processors after the January 2013 horsemeat scandal marked a watershed in prime cattle purchasing in the UK the implications of which many feeders and finishers, as well as organisations that represent them, have still to grasp.
Essentially it means that feeders who produce commercial suckler or dairy cross steers and heifers (not scheme cattle like Herefords or Angus) will make most money if the cattle they present to processors contracted to supermarkets are UK-origin, farm assured, UTM, deliver carcases weighing 280kg-380kg, classify E, U. R, 3, 4L and O+3/4L and have not moved through more than four farms. Some young bulls can qualify if they are sold before they are 16 months old.
There is nothing remarkable about these animals - apart from the fact they account for almost all the non- speciality (not Angus, organic etc) stock processed by mainstream companies, which include ABP, Dawn, 2Sisters, Dunbia, Woodheads, Foyle, Scotbeef, or Dovecote Park, and command higher prices than similar commercial stock sold to other companies
Just 18 abattoirs account for 65 per cent of GB’s cattle kill.
There are of course other outlets but they are minor in comparison. In 2012 the GB-wide Cattle Health and Welfare Group (CHAWG) confirmed that just nine abattoirs, each killing over 50,000 cattle a year, averaged 72,388 head and accounted for 41.86 per cent of GB throughput.
Furthermore another nine abattoirs processed between 30,000-50,000 cattle a year, averaged 40,739 head and handled 23.56 per cent of the GB kill.
This means that only 18 abattoirs, most of them owned by just six companies, processed 65 per cent of GB’s cattle.
These figures include some cows but the message is that supermarkets, which dominate fresh beef sales in the UK are themselves served by only a handful of processing companies – each of which demands supermarket specification cattle so it can meet its supermarket customer’s orders.
These demands are real. Feeders who filter out of specification cattle (usually overweight, over finished, or poor confirmation) into their deliveries are heavily penalised and should an animal that is not farm assured turn up in the lairage the penalty is anything from 30p-70p a carcase kilo - and in some cases no payment at all.
The move to supermarket specification began after January 2013 when supermarket demands that their contracted processors pay even more attention to the origin and provenance of the cattle they handled were fuelled by fear of the discovery of even more horsemeat in mince.
Then they were refined by processors themselves at the peak of the 2014 prime cattle price plunge after they conceded they were hoisting too much unnecessary cost on their operations by purchasing cattle they did not want and then burdening themselves with avoidable expense when selling off this beef at a huge discount through the secondary wholesale system.
More medium sized cuts off medium sized cattle needed for multiple retailers.
Over 2013 and early 2014 supermarket demands for tightly specified carcases increased. They wanted more medium sized, medium priced, cuts off medium sized cattle but more than anything else they wanted to avoid being caught out by something (like horsemeat) which could undermine both their reputation and their sales.
Their answer was to work through the shortest possible supply chain – and for the majority that meant concentrating exclusively on tightly specified cattle of UK origin whose beef could be sold under a British label.
These buyers include Morrisons/Woodheads, Waitrose/Dovecote Park, Aldi/ABP, M&S, the Co-op and Lidl.
Tesco, Asda, and Sainsburys, which alone among the UK’s multiples buy beef from the Republic of Ireland (RoI), reacted by buying less and also by keeping their Irish supply chains as tight as possible by insisting they would only purchase beef taken from cattle that their contracted suppliers had bought and processed themselves.
To protect themselves further all the supermarkets, whether they bought only UK origin beef or included some from the RoI, demanded it was taken only from assured cattle.
Retailers concentrating on UK-only beef fared best because UK consumers overwhelmingly prefer UK-processed beef sold in packs carrying the Red Tractor label and are not obviously impressed with RoI beef – even if it carries Irish Quality Assurance Scheme (QAS) credentials.
Just 18 per cent of imported Irish beef sold through supermarkets
Nothing has happened since to soften this determination. Indeed it is estimated that less than 18 per cent of beef imported from the RoI into the UK is sold through supermarkets.
Processors made their move to reinforce UK-origin, farm assurance, and tight specifications in mid-2014 when they realised that one of the reasons they were paying so little for UK-produced cattle was that they were wasting money buying too many they did not want.
The main reason for the crash in the market was a simultaneous over-supply of cattle in the UK and the RoI but processors, who were worried that unusually low prices were endangering long term supplies, realised they could pay more for the cattle they did want, and therefore give more encouragement to on-going deliveries, if they refused to handle cattle that were outside their specification.
This meant taking a tougher approach with suppliers. Until then it had been practice for feeders to include stock, like an awkwardly shaped dairy cross or a steer that was marginally overweight, in the load.
And this was accepted by buyers who until then had considered the cost and effort of re-distributing non-supermarket specification beef at discounts of up to 30 per cent was justified if it meant a regular supplier was more likely to continue to send cattle to them and not to a competitor.
But from June 2014 this was no longer the case. Penalties for non-supermarket specification cattle became so extreme they were no longer worth sending in and regular suppliers were told that the tolerance on out of spec cattle in a load was just five per cent when previously it may have been 20 or even 30.
As a result feeders drew their cattle more carefully, purchased their replacements more carefully, and processors with supermarket contracts were able to pay more than they otherwise would have done for in-specification cattle because they were not wasting money elsewhere.
UK prime cattle enjoy the highest price in Europe by a country mile.
Another result is that the UK’s prime cattle continue to enjoy the highest price in Europe by a country mile with commercial steers and heifers currently selling for around £180 and £160 a head more than similar cattle from the RoI.
A recent cross-EU price comparison on R3 heifers (all types including organic and Angus) confirmed a British average of 366p and a Northern Ireland average of 359p compared with an EU average of 300p and an RoI average of 312p.
What this list does not show is that the Northern Ireland average has improved dramatically since British supermarket purchasing concentrated more heavily than it had done on UK-origin cattle carrying Red Tractor credentials.
As recently as 2013, before demand for assured cattle of UK origin strengthened, Northern Ireland’s average invariably hung mid-way between GB and the RoI while the regional price table within GB was, as usual, headed by Scotland, followed by the North of England, the English Midlands and Wales, and finally the South of England.
This situation is outlined in the table covering the average prices for R4L steers (including Angus, organic and other scheme cattle) recorded over w/e May 11th 2013 which is printed immediately below.
Region
Price
Scotland
412p
North of England
409p
Midland and Wales
396p
South of England
394p
Northern Ireland
378p
However after supermarket demand focussed even more heavily on assured UK-origin steers and heifers the Northern Ireland average leaped into third position leaving the South of England trailing in bottom place.
This fundamental shift, and its far reaching implications, are confirmed by the regional R4L steer averages recorded over w/e December 27th 2014 which are printed immediately below.
Region
Price
Scotland
376p
North of England
370p
Northern Ireland
361p
Midland and Wales
357p
South of England
354p
There will always be variations but a primary feature of post horsemeat scandal trading, and retail/processor concentration on assured UK-origin prime cattle has been a surge in Northern Ireland values because the determined search for fully specified supermarket cattle extended to all parts of the UK.
Supermarket concentration on farm assurance not expected to relax.
Also important to note is that supermarket concentration on farm assurance is not expected to relax because the multiples are keen to do all they can to make sure they do not fall foul of the newly installed Groceries Supply Code of Practice (GSCOP) - which is yet another strategy that has been introduced to reinforce food chain integrity after the horsemeat scandal.
It is policed by Groceries Adjudicator, Christine Tacon, and supermarket bosses have reacted by shortening as many supply chains as possible, not just meat’s, and bolstering their insistence on product provenance – which in the case of beef means farm assurance.
Or to be more exact – whole of life assurance.
It is indeed a retail approved move – although it is also backed by the Farm Animal Welfare Committee, the Food Standards Agency, the big beef processors and many others, including farmers, who believe that beef is a food, and its production, like that of other foods, should be scrutinised and certificated.
This being the case suckled calf breeders, and dairy beef rearer/feeders should be able to sell more cattle for more money than they would otherwise have been able to if they invest in a Red Tractor certificate and reinforce the drive for regular and reliable supplies of UK-origin, whole of life assured, supermarket-specification, commercial cattle.
They will deny themselves the opportunity to increase their incomes if they do not.
(Robert Forster produces Beef Industry Newsletter, which is the best single source of beef industry information available in the UK. It includes an informed, prime cattle price forecast and 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.)
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