"Retailer Market Share in Ireland - DOC"
MEAT INDUSTRY IRELAND SUBMISSION April, 2010 2020 STRATEGY – Beef Sector Submission from Meat Industry Ireland National & International (Beef) Context Beef Production – remains the dominant enterprise on majority of Irish farms – 100,000 farms have beef enterprise – 68,000 farms involved in specialist beef production. The Irish beef processing industry has been transformed from a frozen commodity business in the early 2000’s to a key fresh food supplier to blue-chip retail and food service customers across the UK and Europe. This transformation has seen an unprecedented increase in producer prices from an average €2.44c/kg in 2003 to a high of €3.34 in 2008 before a combination of sterling devaluation and the recession saw prices fall to €3.05 in 2009. Outlook: Income challenges and Competitiveness issues The current recession and in particular the re-emergence of consumer demand for value and increased retailer competition for market share has highlighted the buying power of large food retailers by comparison with a fragmented supply chain. It also suggests that securing increased revenue from the marketplace will be difficult. The second source of income for producers, direct payments under the CAP, faces significant challenges arising from CAP Reform proposals that will seek to transfer an increased share of the overall CAP budget to “new” member states. For producers and processors the key medium term focus must be cost reduction and production efficiencies. Supply Irish Beef Production currently in decline; Short term (2012) projections: Beef slaughtering -10%; EU beef production to fall by 5% by 2015, with modest reduction in consumption; Some traditional beef exporters (e.g. Argentina) withdrawing from export trade; EU beef imports currently restricted; MEAT INDUSTRY IRELAND SUBMISSION April, 2010 Demand Global demand for protein increasing (population growth); FAO forecast global food production needs to increase more than 40% by 2030 and 70% by 2050; EU beef market deficit set to increase to 600,000 tonnes by 2015; Threat of cheaper imports to EU under international agreements; Productivity / Competiveness Farm: Poor technical performance/farm structure & related lack of profitability; Undoubted potential comparative (with EU) production cost advantages (grass); Better beef farming will increase productivity, profitability and reduce emissions. Processing: Business costs (labour, energy, waste, etc.) out of line with target markets; Over-capacity adding further cost disadvantage; Modern processing infrastructure operating to highest technical standards; MEAT INDUSTRY IRELAND SUBMISSION April, 2010 Beef Sector Strategy Analysis Factor Influencing Growth: Actions Required: 1. Currency 30% devaluation in sterling since 2008 Intensify efforts to increase proportion of exports to euro zone Fluctuations: 53% of Irish beef exports to the UK At EU level, Government needs to highlight unique impact of Strong Euro also impacting on sales to Sweden & €/£ exchange rate on Irish food businesses Eastern Europe and on international ($) sales (hides, offals etc.) 2. Policy & International WTO - a deal like one on the table will undermine Irish Current EU offer on Agriculture should be withdrawn – global Trade Agreements: and EU beef production environment for food has changed. EU advancing with bilateral Free Trade Agreements Any new import quotas confined to manufacturing beef (FTAs) Maintain ‘fixed + ad valorem’ structure for duties. CAP Post-2013 outcome uncertain FTAs – offer greater scope for control / SPS issues need to be Irish negotiators must recognise high net-value addressed added/low import content of Beef sector and its key Protect CAP budget, maximise Ireland’s share of CAP payments contribution to the economy & ensure allocation that supports active producers National discretion on CAP is important 3. Funding/Capital Maintenance of Suckler Cow herd critical Need SCWS retention based on ‘national’ value added /Incentives Fiscal/tax measures to support high labour intensive analysis. industries PRSI rates tiered for intensive labour industries Low cost long term working capital needed Need for mechanism to provide affordable working capital Producers being starved of working capital for producers (Agri-bank, CAP payment coupons, reduce dependence of feed/fertilizer supplier credit) MEAT INDUSTRY IRELAND SUBMISSION April, 2010 4. Demand Growing global populations will drive protein demand ABB Marketing strategy – Increase proportion of total sales to Marketplace Beef demand growing; Declining EU availability euro zone; Management of EU beef imports critical Focus on differentiation of Irish product & offer-this should Trend towards convenience formats lead to ‘premiumisation’ of beef sales Retail buying power v/s fragmented supply chain Grow by-product sales to international markets Access to Asian growth markets Functional foods / Bio-actives Health issues – product reformulation (fat, salt, etc.) White List status & export certification Retail buying/supply chain - EU policy to address need for a ‘level playing pitch’. 5. Supply Producer Profitability is the critical determinant of future growth potential Farm Structure Only 20% of beef farms economically viable, when Demography and fragmentation; need fiscal incentives to the value of family labour and capital invested in hasten change. livestock and machinery, is considered (Teagasc NFS) Without producer adoption of technical innovation Farm profitability: – the outlook for beef profitability at farm-level remains Need to address productivity poor Reduce calving interval Significant difference in performance between farms Technology/Knowledge transfer – refocus and compared to Teagasc optimum beef system Incentivise new entrants blueprints Share farm resources Demography - only 6% of specialist beef producers Need re-appraisal of beef production systems (Steer v Young under 35 years (ave. all farms 6.9%); 28% over 65 Bull; age of finishing; calving patterns) years (ave. all farms 24.8%) Feed costs – adopt GMO technology Fragmentation - ave. beef farm size: 27.5 ha (ave. Irish Genetic improvement programme farm: 32.3 ha); Fragmentation of most holdings increases costs and reduces uptake of modern Processing:- management practices Focus State assistance on jobs retention and recovery of value Live export drain – potential jobs and value added added being ‘exported live’ being ‘exported live’ Continue focus on production of in-spec cattle o QPS in place o BQAS maintenance & expansion Winter finishing - Supply contracts MEAT INDUSTRY IRELAND SUBMISSION April, 2010 6. Competitiveness Irish labour, energy and ‘business’ costs are out of line Re-align business costs with competitors – labour, energy, with those of target markets waste… Over-capacity increasing fixed cost burden (40-50% Over-capacity – further restructuring at slaughtering required; over-capacity at slaughtering level – 3 days weeks two ‘factories’ exported ‘live’ in ’08- four in ’09 and six in ‘10(f) unsustainable) Need assessment (quantification) of impact of live exports on Live export growth exacerbating situation national balance sheet to support basis for investment in Value added opportunities contingent on ‘profitability’ adding value at home. (Profitability will be a function of margin/costs) Continued investment in processing efficiency – State Aid Currently more attractive to develop business outside rules. ROI Waste-to-Energy initiatives 7. Regulatory Burden One of the most regulated sectors in the Irish Service contract/charter needs to be established between economy Competent Authorities and Processing Industry and meat Over-regulation generating unacceptable cost burden inspection service needs to be aligned to charter. Processing facilities operating above legislative standards to satisfy customer demands Cost/Benefit analysis needs to be incorporated for all future Meat inspection regime out-dated legislation EU regulatory framework too slow to change/revise Regulatory reform/simplification process needed 8. Research Research & training resource critical for advancing Teagasc beef advisory & research resource to be sustained; Training farm productivity and production system change Support for Beef Discussion Groups Unique attributes of Irish beef to be researched Cooperation of Stimulus & FIRM funding further. Food safety & revision of meat inspection Potential for bio-actives from beef/beef by-products Functional foods, Bio-actives from by-product stream, product to be exploited reformulation Recent advances in beef and dairy breeding and their Sustainability & Food for Health communication to producers in a tangible manner are The ICBF breeding programme needs to be at least sustained. critical for future advances in productivity. MEAT INDUSTRY IRELAND SUBMISSION April, 2010 Conclusions 1. In the absence of a suite of complementary measures/policies to address above issues the ‘quality’ red meat sector will not grow but will contract by 20%. 2. Growth in the Dairy sector will partially cushion the decline in total beef production. However, appropriate finishing systems for dairy progeny will have to be investigated. Need to monitor also any negative impact of dairy breeding changes on the beef merit of dairy progeny. 3. It is difficult to make Beef Sector growth predictions without guidance on planned policy in a number of key areas affecting production and processing economics. Annex 1 displays output predictions for the Beef Sector, for 2012 (for which the outcome is already pre-determined) and for 2020 based on two scenarios (Scenario 1 is a ‘no change’ position and Scenario 2 explores the potential growth in the Sector with appropriate policy formation and delivery on production, processing and marketing objectives). 4. If the impediments to growth were removed and necessary ‘enablers’, including access to credit/investment, were put in place, the production, processing and export marketing/demand capacity exists to grow the beef slaughterings by 18 -20% by 2020 using 2009 as a base year. This of course is against a background in which the beef sector will contract by up to 10 % in the short term so a reversal of this and a growth of 18- 20% by 2020 would represent more progress than the 18- 20% suggests. MEAT INDUSTRY IRELAND SUBMISSION April, 2010 Annex 1: Growth Prospects in the Beef Sector Scenario 1 Scenario 2 No Change Strategy 2020 2009 2010 2012 2020 2020 Finished Cattle Finished Cattle Finished Cattle Finished Cattle Finished Cattle Availability Availability Availability Availability Availability 1,575,000 1,635,000 1,425,000 1,225,000 1,870,000 Kill: 1,525,000 Kill: 1,570,000 Kill: 1,355,000 Kill: 1,075,000 Kill: 1,800,000 L.E.: 50,000 L.E.: 65,000 L.E.: 70,000 L.E.: 150,000 L.E.: 70,000 Other Live: 236,000 Other Live: 335,000 Other Live: 350,000 Other Live: 400,000 Other Live: 300,000 Availability pattern to 2012 already decided Beef Export volumes: 320,000 tonnes 540,000 tonnes Impact of Scenarios Potential change in value of compared to exports: - €420 million + €250 million 2009 levels Employment implications: 2,000 job losses 1,000 new jobs Scenario 1: Continued decline in suckler cow herd to 850,000 head. (No Change) Growth in dairy cow numbers (approx. 7.5%) - little meaningful contribution to beef output (due to breeding decisions and lack of appropriate dairy beef finishing systems) Further development in live exports to NI/GB and the Continent Scenario 2: Restoration of suckler cow herd to 2005/06 levels (approx. 1.15 million head) (Strategy 2020) Growth in dairy cow numbers (approx. 7.5%) Development of appropriate finishing systems for dairy progeny. Improvement in calving intervals to boost calving percentage to 95%. Redesign of beef productions systems (improved output/hectare, earlier finishing, bull beef production, once-bred heifer system) MEAT INDUSTRY IRELAND SUBMISSION April, 2010