Why the grid pricing structure needs to be radically overhauled
With factory quotes largely unchanged, there is talk in some quarters that the trade might be about to turn a corner.
Others sources were not as upbeat, but there was less negativity, and there was agreement that mart prices for beef, especially cull cows, got a serious shot in the arm towards the end of last week.
Being the bottom rung of the beef ladder, what happens on the cull cow front is often an indicator of where the factories might be about to go. Although cows were stronger by up to €100/hd at some marts, there was no change in their factory quotes, with O grades ranging from €4.10-4.20/ kg and P3 on €4.00/kg.
While this sudden burst of mart buying suggested to some people that numbers may be about to tighten and prices improve, I’m long past believing that factory bosses are going to wake up some morning to find that cattle have suddenly become unreasonably scarce.
The latest Department data shows that for the week of February 24, the total kill was 37,686.
However, there does appear to a little movement in places, with €5.10/kg reported to have been paid yesterday for bullocks in the midlands and €5.15/kg quoted for heifers, while in the west and north quotes appear to be running from €5.05 and €5.10/kg respectively.
The south and east are a different proposition, with quotes “cemented in” at €5.00/kg for bullocks and €5.05/kg for heifers.
Although there is up to 10c/ kg of a difference from the top quote to the bottom, I’m not getting any clear indication as to the overall direction of travel.
After falls of 15c/kg over the last three weeks, quotes for bulls in the west and midlands were yesterday also steady at €5.35-5.30 for Us with Rs on €5.20-5.25/kg.
Again, things are less rosy the further south you go, with some of the major players in the southeast quoting Us at €5.25/kg and Rs at €5.05/kg.
Overall, the trade appears to reached some degree of stability, but it is hard to predict what happens next.
Department data shows that out of 654,182 steers slaughtered in 2023 — excluding factory owned, contract slaughtered, reactors or organic — 97,233 potentially received a grid bonus, 6-24c/kg; 118,180 qualified as potentially reaching the base price; and the remaining 438,769 potentially suffered penalties that ranged from 6-54c/kg.
I say ‘potentially’ as last year large numbers of stock were sold on a flat-price basis and avoided the vagaries of that system. However, if supplies had not been periodically tight the factories would have priced everything on the grid.
If that had happened the penalties imposed would have far outweighed the bonuses.
In the current market with consumers identifying more and more with specific breeds such as Angus and Hereford, the initial premise that the grid would benefit the breeders of better continental stock has been debunked.
Look at it this way: U+ continental bullocks are today working off a base of at best €5.10/ kg; including grid bonuses he’ll make up to €5.34/kg.
Angus bullocks, grading maybe O= to R-, would if put on the grid last week have made €4.865.10/kg; in reality they were moving at flat prices of €5.50/kg.
The grid pricing structure touted by Teagasc and the factories as reflecting market requirements is outdated. With the composition of the national herd having become more dairy-orientated, it needs to be drastically overhauled to reflect the realities of where the meat business is at.
As a colleague said, “If a farmer gets a flat price how does that get recorded when his cattle are worked into the system for price recording by the Department?”
‘The initial premise that the grid would benefit breeders of better continental stock has been debunked’