Paul Daly: Beef Contracts, Falling Exports and Market Reality

Thank you to members of MMII for coming in today. Look, we can talk about this, and we've talked about it before, we've talked about it in this room, we've talked about it all my life. Farmers, unfortunately, are price takers, and always have been. For the purpose of argument and paying devil's advocate, one could say that the man that Deputy Eyre talked about gave €350 too much for the store. But he gave it in good faith. How can we predict for the farmer going forward what's happening? You have contracts. The people you represent have contracts. When I sign a contract, any type of contract, in business or whatever, there's a price agreed, and there's a tonnage or whatever agreed. When do the gold costs move? If you sign a contract to supply beef into whatever country, to whatever, to Tesco, to a multinational, to a supermarket, to a different country, to whoever, you sign a contract for X amount of tonneage at so much per tonne, or per kilo, or per pound. You'll give less money next week, but you're supplying the same contract. When do the gold costs move? When does that price change? How come we can't predict when that contract runs out, OK, price has got to be renegotiated? It could be on Adelaide next week, there's a major contract renegotiation going to happen at the end of July with whoever, China, Japan, whoever. There's potential that beef prices might fluctuate. And the farmer gets some kind of a forewarning for this. In my opinion, and I want you to clarify it, you have these fixed contracts going forward, at a fixed price, but you still bring down the price every week at whatever whim or humour you're in on a Monday morning. I don't think that's the case. Well, you should know, is that what you think? Well, I'm told that that is not the case, then let's put it that way. And there are significant contracts amongst different processors, with particularly farmer finishers. Well, obviously we deal with the finishers, to a large extent. We don't know what the nature of those contracts are, because that's a commercial matter for individual companies. You aren't going to find that between a farmer and a processor, nor a processor and a retailer. So that's off territory from our perspective here. But I can tell you that there are significant contracts. Not all farmers want contracts, not all farmers look for contracts. I'm not talking about farmers having contracts, I'm talking about the processors having contracts. Processor contracts are the very same. They do have all of the things, I suspect, that you have suggested they would have in the contracts. And one of the key things that they have is a supply contract for a particular period of time, probably at a particular price. And when the market situation changes, then there have to be adjustments. Just like you say, you cannot produce to a contract the value of that contract that was formulated in the early stages, and expect when the entire market explodes as it does, that you can continue to do that. And the way in which that was represented back to farmers was that clearly processors had to meet those contracts. What they had to do in 2025 was they had to compete for the animals, and that's what drove up the price. And so the farmer got the return from the competition that was going on between processors, retailers, wholesalers, and buyers generally. And that's how it's reflected. So what contracts and markets have been lost? So if you take into consideration the fact that the number of animals being killed every year is down, 14.8% CSO announced today. The type of animal is a younger animal or is a dairy bred animal. So that means the tonnage must be way down. So have we lost major contracts? And how come that's not being publicized? We're hearing a good news story every year about our beef exports. Everything is up with new markets, trade missions going all over the world. They're all bringing back good news. We're killing less cattle, we're killing smaller cattle. Less numbers of smaller cattle per tonnage. So if we're to talk about tonnage, forget about financial yield and forget about animal numbers. Our beef exports are way, way, way down. The volume of beef exports are down, that's very clear. The stats show that. I suppose carcass weights did increase last year, Senator, on the back of the good prices I would suspect. Farmers kept cattle a little bit longer. Average carcass weights were probably up... Their sucral numbers are way down and we're dependent on a dairy bred beef. So the matching carcass weights are not... They're up about 25 kilos on average, Senator, across the industry. So that obviously helped in terms of offset some of the reduced throughput. We lost 213,000 animals from the kill last year. We're down, as Philip has said, about 70,000 so far this year. Our beef prediction is that we'll come out somewhere where we were last year, about 1.59 million animals. But a lot of that will depend on what happens to the market in the second half of the year. And whether we can get some buoyancy back in that marketplace. We don't want to predict what might happen to the market. We hear about hedging, we hear about the fuel crisis, we hear about good progressive companies. They have their fuel price hedged. Can we not predict going forward? It's very difficult, it really is, Senator, to try and predict what the market is going to be. If we all knew that, we might all be in very different roles. We expect that price... It's a supply and demand issue. We've got to understand as well, the market's very transient. So what the market is like today, it may be very different in two months. Is there a rise to the bottom within the market? No, absolutely not. How come we can hear then about Irish quality beef being displaced by what we know is coming from Brazil? Is there a rise to the bottom within the market? The quality doesn't seem to matter anymore. We don't know how much product is being displaced by Brazil. We're starting to see that increase in southern hemisphere beef coming into the UK. We've seen some of the UK retailers trial that beef. They've gone on alright with it. Very small margins. The concern is that they would look to grow that over time. But as Philip said, it's a global marketplace we operate in. China now have a 55% tariff on Brazilian beef going in there above a certain quota level. So that's going to create a short-term challenge over the next two years. But our quality maintained us for a long time. Of course it did. It sounds like it's gone now. No, I disagree. I think it's probably now more than ever. We have to really look at what got us to that place in the first place. So we have to really, really focus again on brand Ireland and Irish beef. Can we not demand a premium price for a premium product? That's the objective in the marketplace to try and compete against these cheaper imports. And we will continue to try and do that. But we seem to be going to the price of the inferior quality product. We're going down and fighting them in the market. The inferior quality product undoubtedly has had an impact. But the bigger issue is consumer sentiment and consumer challenges. We're in a cost of living crisis. In the UK, the situation over there is very difficult. So the consumer has moved away from beef. That is the reality. But if you look at the consumer sentiment that the Work Board B is doing, Philip mentioned the survey earlier on, 70% of consumers say that they want to purchase more beef over the next year or two. So there's positive sentiment there. But it's going to have to be at a price point that has been lower than the price that we saw last year. That's what the market reality is telling us.