Press Release - Which baseline price will be used to carry the Tesco bonus - and will Angus cattle in NI face an unwarranted price penalty?
13th November 2012
Which baseline price will be used to carry the Tesco bonus- and will Angus cattle in NI face an unwarranted price penalty?
The National Beef Association has welcomed Tesco’s announcement of ex-farm price contracts for approved finishers and is especially excited about the promise of a premium up to 40p above published average prices for the delivery of certified, in-specification, high provenance stock including Aberdeen Angus.
However it is keen to know exactly how the bonus payment for supplying top ranking cattle types will be constructed - and exactly how much income individual finishers in all parts of the UK can look forward to receiving if they supply the type of animal that is wanted.
“We are pleased Tesco has set about building supply structures to capture more of the high provenance beef that an increasingly high proportion of consumers are ready to buy at top retail prices,” explained the NBA’s Northern Ireland chairman, Oisin Murnion.
“But questions are already being raised about the base price the bonus will be built on and early indications are that actual realisation prices for contracted suppliers may vary widely at a cross-UK level.”
“If this proves to be the case it would be a disappointment for feeders faced with a low net price and finishers in Northern Ireland are especially anxious that they do not, yet again, suffer as a result of the inexplicable price discount that already exist between their cattle and similar animals produced by fellow farmers in other parts of the UK.”
“For example this week we understand British feeders supplying certified Aberdeen Angus steers and heifers to Dovecote Park in Northern England can expect payments to be calculated around an R4L base of 390p and that the R4L base in Scotland for most Angus cattle is 380p-384p”.
“But here in Northern Ireland typical 0=3 classification Angus cattle receive a bonus of just 18p so feeders supplying 280kg-380kg carcases expect less than 340p in net terms – which is a lift of just 18p if NI’s all-cattle bonus for supplying assured, in-spec, stock is also included.
“Finishers in the Province are seriously worried that they will not be treated as equals with other Angus, or native breed, feeders in other parts of the UK and that the current 44p, £160 a head, deadweight discount on our commercial cattle compared with the GB average will feature in our Angus bonus calculation too.”
It is expected that Vion plants in South-West England, South Wales, and North East Scotland, will process beef, including Angus, supplied by contracted finishers and aimed at Tescos’ top retail category.
But Tesco may have to sub-contract at processor level if it wants to benefit from the strong Angus cattle supplies available in Northern Ireland and may therefore use a factory which is keen to maintain the inexplicable, long term, NI discount.
“Regional price levels could determine the actual value of contracted Angus cattle processed for Tesco on the mainland too,” warned Mr Murnion.
“In the South of England commercial cattle are currently trading at 345p-347p, those in Wales and the English Midlands 348p-350p, while those in Scotland can expect 360p-364p.”
“Does this mean that Tesco cattle earning the maximum bonus would currently earn 385p-387p in South West England, 388p-390p in Wales, and 400-404p in Scotland?”
“It is also important to note that this calculation is based on an estimate because no officially confirmed commercial cattle price average exists.”
“National and regional averages based on classification are confirmed weekly but these include Angus, organic, and other high provenance cattle that are not genuine commercials – and so may not be used as a baseline to calculate Tesco’s Angus bonus.”
“Actual returns for contracted feeders supplying beef for the Tesco Finest range will depend on whether the current UK or GB average price is used, or whether a UK or GB commercial price line is estimated, or whether either of these price lines is used on a regional basis.”
“Alternatively a cross-UK price line, which takes account of the high prices paid by leading Angus buyers like Dovecote Park could be introduced – and that is clearly the route that National Beef Association members who are examining the potential of the Tesco contract would prefer,” Mr Murnion added.
For more information contact:
Oisin Murnion, chairman NBA Northern Ireland.
Tel: 07739 632048