I am aware that returns to beef producers in individual EU markets reflect not only the local supply / demand balance but also overall trading conditions within the internal market and trade flows to third countries. Buoyant European cattle prices in 2011 and 2012 are attributable to a supply deficit throughout the EU and to strong global demand. In fact, Irish cattle prices have exceeded the EU average level for most of the year to date, with the Irish price for the benchmark grade only dipping below the EU producer price in August when countries such as Germany and Italy experienced supply shortfalls which had the effect of driving up prices substantially in those markets.
I am cognisant of the export dependence of the Irish beef industry which means that external market developments largely determine Irish cattle prices. Ireland is a small, peripheral market producing an average of 570,000 tonnes annually, of which some 90,000 tonnes is destined for domestic consumption. Over the past decade, the profile of Irish beef exports has changed from a reliance on volatile international markets to a focus on higher value consumer markets in the UK and Continental Europe. Irish beef is now listed with more than 75 high-end retail chains across Europe. Securing and retaining such a wide portfolio of customers has contributed significantly to higher returns for Irish beef in recent years.
The UK is approximately 80% self sufficient and is, by a significant margin, the main market of Irish beef accounting for around 50% of exports in volume terms. Irish beef comprises over 70% of total UK beef imports on account of our close proximity to the market and our strong customer profile which includes most of the leading retail, manufacturing and foodservice companies. In terms of sensory attributes, Irish beef tends to closely resemble the UK's domestic offering because of similarities in our production systems (i.e. grass-fed steer and heifer cattle with moderate carcase weights, fat cover and marbling). Trade with the UK is impacted by fluctuations in the euro/sterling exchange rate and the extent of Britain's import requirement which is forecast to increase in the short run consequent on a continuing decline in domestic beef production. With consumption expected to remain stable and a continuing reduction in the size of national cattle herd, British beef imports are predicted to grow from 381,000 tonnes in 2011 to 417,000 tonnes in 2013.
A number of factors have been identified to account for the differential between Irish and UK cattle prices. These include a British consumer preference for indigenous beef product. In any analysis of comparative prices, it must also be recognised that UK cattle prices are currently among the highest in the EU. Moreover, a price differential makes Irish beef products competitive in the UK market such that Ireland supplies the bulk of the UK's import demand notwithstanding additional logistical and processing costs incurred in shipping to that market. When comparing Irish and UK cattle prices, it be noted too that there is a significant exchange rate effect making the UK price appear even higher. For instance, the current GB R4L grade steer price, averaging Stg £350.9 pence/kg (deadweight), is equivalent to 439 cent/kg (deadweight). If converted at the rate prevailing a year ago, there would be a reduction in euro terms of almost 40 cents.
In the longer term, the industry aims to maximise returns for Irish beef through its Repositioning and Differentiation strategy that focuses on the key attributes of Irish beef: environmentally sustainable, grass-based production systems, full traceability, Quality-Assurance at all stages and superior eating quality.
