Beef and sheep profits warning to retailers

Uk - Supermarkets and meat processors were under pressure this week to increase farmgate prices following fresh evidence that the vast majority of cattle and sheep farms were unprofitable.

24 November 2006

2 minute read

Europe

The first post-decoupling report into costs of production in the English beef and sheep sector found that only the top third of businesses were making a profit after taking out subsidy payments and labour costs.

Calling it a ‘sobering and truly transparent assessment’ of the sectors, the English Beef and Lamb Executive (Eblex), who commissioned the report, said the onus was now on retailers as well as farmers to act to improve margins in the sectors.

According to the survey of more than 300 enterprises, English farmers were losing, on average, £351 on every animal in lowland suckler herds and £49 for every animal in lowland flocks.

Intensive finishing units were losing £74 per animal and extensive finishing units £262 per animal.

Eblex chief executive Richard Ali dismissed fears that supermarket price wars and low margins would eventually force beef and sheep producers out of the mass market.

“We don’t want our industry to be sidelined into producing for niche markets, we want to stay in the mass market.

“Retailers keep telling us that their customers want high-quality home-produced beef and lamb,” he said.

Mr Ali said a critical mass of producers could become profitable in what he called ‘a buoyant market’ if they continued the trend of improving efficiencies throughout the farm business and if retailers gave a fairer price to suppliers.

“Retailers need to make sure they are purchasing at a price that is right for their supply chains,” he said.

Other industry figures warned farmers not to expect a ‘market miracle’.

“There’s no way the market is going to cover the cost of production,” said National Beef Association chief executive Robert Forster.

“Farmers have got to seriously increase efficiency. This only reinforces the challenge of decoupling.”

Mr Forster said farmers should be able to operate true profit and loss accounts in the same way as retailers and processors. As such the inclusion of unpaid family labour costs, an average £11.18 per hour, in the cost of production analysis was long-overdue.