UK’s beef farmers pleased Commissioner could probe ex-farm price of slaughter cattle
Yet more public criticism of supermarket purchasing strategies has persuaded beef breeders and finishers in the UK that their long-term survival rests on securing a greater proportion of the retail price of beef than they do at present.
They are dismayed by on-going revelations that supermarket buyers bully and cheat at the farmers’ and processors’ expense and appear increasingly prepared to dig in and challenge a situation in which they are required to be satisfied with trading cattle which in pence per DWkg terms are worth only around half of the retail price of beef.
Currently finishers are taking just 51% of the shelf price which points to beef from a £1,200 bullock earning the retailer almost £2,400 in gross terms.
The most recent extremities have been 48% towards the end of last year when the UK’s ex-farm prices were in a trough and 54% in 2013 when they hit an all-time high.
Some are thinking of following up recent reports that the European Commissioner for Agriculture, Phil Hogan, is keen to curb excessive retail purchase power and is constructing plans to eliminate unfair treatment of food suppliers.
He has already made clear his certainty that supermarkets are not responding to voluntary methods of improving purchase practice and wants to be able to force them, possibly through compulsory adjudication, to pay more attention to the consequences of their actions.
Or, in other words, realise that if they continue to squeeze the supply chain until its pips squeak they will shoot themselves in the foot by putting essential supply sources out of business.
As a result Hogan can expect to be told that the UK’s most influential retailers and processors, most of whom run operations in Ireland too, must be able to demonstrate exactly why they need to take £1,200 from the £2,400 they earn from retail sales and pass back just £1,200 to breeders and feeders who have spent as much as three years bringing their animals forward.
The gross margins sought by multiple retailers are a close kept secret but there is a suspicion that 17% is the target of at least one company – which looks to be way too much.
In view of this, Hogan can expect to be encouraged to ask retailers for a full cost breakdown so it can be seen whether a 50% joint share of the UK retail price is justified or not.
It may also be suggested to him that It would also be useful to know how much processors can earn from offal, which they do not buy, but nevertheless sell to an increasingly enthusiastic range of domestic and international customers.
And that it would interesting to discover whether or not retailers who trade huge volumes of beef each week can manipulate processor demand for prime cattle as easily as someone opening and shutting a tap by raising the retail price so less beef is purchased and both chill room stocks and slaughter-ready cattle supplies back up – as is happening at present.
And then opening the tap by reducing the price when cattle are cheaper so more beef can be retailed, some of it through promotions, at less cost.
The public mood surrounding supermarkets is definitely shifting. An overwhelming majority of UK consumers, almost 90%, are unhappy with supply chain bullying adopted by some supermarkets and want farmers, and other producers, to be given a fairer crack of the whip.
A recent survey, conducted by the internationally read retail magazine Supply Management, confirms that more customers than supermarkets think are critical of buyer attitudes which, it concludes, give procurement specialists a bad name.
The overview is that savings achieved through supply chain bullying deliver poor results over the long term and that consumers ultimately suffer through either restricted choice or restricted supply.
This criticism has been mirrored by a Federation of Small Businesses survey which identified pay to stay, late payment, early payment discounts and retrospective discounting as the areas which generated most anger.
It has been noted that discounters like Aldi or Lidl make more effort to treat suppliers fairly and one result could be that by 2019 the combined market share of Tesco, Asda, Sainsbury and Morrisons, which are held to be the biggest culprits, could drop from 42% of the current food market to just 34%.
The UK’s Groceries Code Adjudicator, Christine Tacon, has said the solution is in the hands of the supermarket sector’s top managers who should ask themselves “What objectives have you set your buyers?” followed by “Are you putting them in a position where you are forcing them to break the code to achieve their objectives?”
Robert Forster is a UK-based journalist who produces the Beef Industry Newsletter.