Retailers making ‘substantial’ mark-ups on heifers destined for supermarket shelves


“There is a lot of extra value in the suckler animal that current beef grid price does not reward”

Retailers making ‘substantial’ mark-ups on heifers destined for supermarket shelves

  • ADDED
  • 7 mths ago

“There is a lot of extra value in the suckler animal that current beef grid price does not reward”

Following the conduction of a beef trial, the ICSA believes that processors and retailers are making “substantial” mark-ups on heifers destined for the supermarket shelf.

“In some cases, however, aggressive discounting by big retailers is used as a means of getting consumers in to buy other products,” said ICSA beef chairman, Edmund Graham.

“When this happens, the farmer is essentially subsidising other over-priced goods in the supermarket.”

The trial found that the higher grade suckler-type animals are yielding a lot of added value through higher meat yield which is not reflected in the beef grid payment system.

It showed that an O= animal, under 30 months, was priced at €1,043 (VAT exclusive) and its meat could fetch €2,217 in the supermarket, a mark-up before costs of €1,174.

The R+ grade suckler animal, under 30 months, was priced at €1,228 (VAT exclusive) and its meat was priced at €2,741, a mark-up before costs of €1,512.

Conducting the trial

The trial was conducted taking two heifers – a Limousin-cross and an Angus-dairy-cross - from Dan Lynam’s farm in Westmeath who were weighed live, slaughtered and hung for 28 days.

The meat from both was then carefully weighed, category-by-category, and then priced according to a range of prices in main retail outlets.

Pricing policy

Graham outlined that there is variation in pricing not only between supermarket chains but within supermarkets, which, he feels, points to the need for a debate about the sustainability of pricing policy.

“We have tried to exclude very high prices which are not reflective. For example, we have taken a price of €28.73 for fillet steak even though we have seen it priced at €37.50.”

“But on the other hand, some supermarkets are selling beef under special offers without any regard for the fact that you cannot feed two animals for the price of one or decide that this month I am going to cut my heifers’ feed by 33%.”

“A farmer might get €1,100 for an animal that has taken over three years to bring from breeding to slaughter whereas processors and retailers expect to make more than that for processing the animal and putting it on shelf, a process which takes three weeks.”

[R+ grade suckler animal]

Beef grid price ‘does not reward’

He stressed that processors make “significant” earnings from the fifth quarter which the farmer doesn’t get paid for. In 2018, beef offal was worth €385 million which equates to just over €200/animal.

“The story gets worse when you consider that this animal will have cost €1,300 to bring to slaughter and the farmer will be expected to have levels of traceability seen nowhere else in the world, be quality-assured and be actively investing in saving the planet at the same time.”

“The real insight here is that there is a lot of extra value in the suckler animal that current beef grid price does not reward.”

From a starting point of two heifers of almost identical live weight (590kg v 600kg), the suckler animal outperformed all along the food chain to yield €523 more value in retail sales, the beef chair added.

“Allowing for her higher kill-out and better grade, the farmer makes €184 (VAT excl) more on the suckler animal. But is this enough of a fair reflection?”

“It is true that the suckler animal takes up more shelf space and has more distribution and retailing costs simply down to more packets of meat to sell.”

“But with the massive efficiencies and economies of scale both in processing and retailing, it seems incomprehensible that a lot more of this extra €523 cannot be returned for the suckler-type animal.”

“It is also important to note that there is a lot of value-added without any major addition of cost other than processing to the O grade animal.”

[O= animal]

Cheap food strategy

The cheap food strategy is “destroying value for everyone”, according to Graham.

While the prices quoted reflect those charged in a supermarket in the past week, there are examples of similar meat cuts being “flogged off cheaply”.

“Supermarkets are notorious for using primary agricultural produce as a kind of “loss leader” to attract in the customers.”

“They then sell the meat or vegetables for unsustainably low prices from the perspective of the primary producer, but it doesn’t matter if other products are being sold to consumers at inflated prices.”

“For example, one supermarket was selling 400g of minced meat for €2 and a few aisles down was charging €32 for 8 replacement shaving blades!”

Further research and investigation

The farm organisation acknowledged that while the trial has the obvious limitation of being based on just two animals, the outcomes point the way for further research and investigation.

Image source: ICSA

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