Grid penalties costing livestock farmers €32m

LIVESTOCK farmers are losing more than €32m a year to beef grid penalties applied to poorer-grading animals.

A study of the 2017 cattle kill commissioned by the ICMSA has shown that the penalties being applied by the factories to O and P+ steers and heifers under the Quality Pricing System (QPS) has increased by 75pc over the past five years.

ICMSA president Pat McCormack said the results of the study justified an immediate and full review of the grid, pointing out that such an examination was agreed nearly three years ago at the Beef Forum but never happened.

The study findings show that O grade stock accounted for almost half the steer kill in 2017, with one in every six of the remaining animals grading P+. The total cost to producers in penalties on the O and P+ grade steers and heifers amounted to €32.6m.

Under the QPS payment system, which was introduced in 2009, the deduction in price (from base) for O grade steers and heifers ranges from 12c/kg to 42c/kg, while P+ grade animals carry a price reduction of between 30c/kg and 54c/kg.

The study shows that suppliers of P+ grade steers were penalised an average of €85/ head in 2017, with the total penalty applied to the sector exceeding €5.24m.

More than one in every three heifers were O grade in 2017, with accumulated penalties in excess of €8m, reducing returns to producers by an average of €51/hd.

P+ grade steers within the national kill have increased by 75pc since 2012, while the percentage of O grade steers has increased by 11pc.

The percentage of P+ grade heifers supplied to the factories has increased by 36pc since 2012, while O grade heifers increased by 19pc.

Mr McCormack said that the study findings illustrated “how blatantly unfair and penal this grid has been”.

“What the factories did was simple: they loaded the penalties on to particularly the O and P grades and then watched as those grades increased as a percentage of the overall kill,” he claimed.

“That was disguised as being a positive measure in favour of better beef breeds.

“This grid has been an even bigger disaster for farmers than we feared, and has worked even more smoothly for the factories than they could have hoped for.”

The analysis carried out on behalf of the ICMSA was based on the actual throughput at the factories, actual grading, and weights of the animals slaughtered in 2017 as recorded by the Department of Agriculture.

The ICMSA leader claimed the grid had been deliberately over-complicated to facilitate a widening of the price gap between the different grades.

Meat Industry Ireland (MII) has not challenged the scale of penalty applied to the returns to farmers for livestock, but a spokesman told the Farming Independent: “There is no question but that the expansion in the dairy cow herd in recent years and breeding decisions in that sector have led to a greater out-turn of weaker grading beef animals.

“A greater focus on the beef genetics being used on the dairy herd is needed and would result in better-performing beef offspring, better grades and less animals falling into penalties,” MII said.

“Animals are purchased by processors on the basis of a differentiated pricing system which rewards the better-grading animals and those most suited to market specifications, and obviously those animals with poorer grades, yield and market suitability do attract a penalty from base price.

“The QPS is science-based and reflective of marketplace requirements.”