Meat sector facing losses

As the country starts to unwind from Covid-19 restrictions, Scotland’s red meat processors say they are counting the cost of the past 15 months of disrupted sales.

According to latest estimates from the Scottish Association of Meat Wholesalers (SAMW), Covid-19 compliance measures have added at least £10 million to processing costs since the first lockdown began.

Another £10m has been wiped off SAMW members’ anticipated 2020-21 income due to estimated losses of around £20 per carcase in relation to fifth quarter exports due. In this case, losses have been caused by a combination of Covid-19 and Brexit.

Unlike manufacturers in most industries, who assemble an end-product from various raw materials, meat processing effectively works in reverse.

Starting with a complete carcase, processors break it down into various cuts of meat, hides, skins, and other animal material known as the fifth quarter.

In percentage terms, roasts account for about. 14% of a carcase, mince for about 42% and sirloin for as little as 3.5%.

The value of the fifth quarter can therefore account for as much as 50% of processors’ gross margins.

A drop in earnings from the sale of hides or a poor trade in tongues, hearts, and livers has a huge impact on final margins.

Over the last couple of years, however, hide values have fallen by as much as £50 each. The trade in other fifth quarter products has also been massively disrupted.

“Covid-19 has been the perfect example of market turbulence,” said SAMW executive manager Martin Morgan.

“Sales to catering and hospitality outlets virtually disappeared overnight early last year, at precisely the time compliance costs shot up.

The health and safety of staff come first, of course, and our sector’s workforce has been amazing in the face of an extremely challenging time.”