Bleak banking analysis of beef crisis

MEN like Lorcan Blake will determine the future of the Irish beef industry in the current BSE crisis and in the years ahead.

He is head of agricultural policy at Allied Irish Banks and has an intimate knowledge of what is going on.

His job is to predict what will happen.

Earlier this week he drew a broadly outline of what has already happened since March 20th when the industry took an enormous body blow, a blow which he estimates will cost the industry £200 million in a full year.

With EU beef consumption down by 30 per cent, he calculates that cattle prices are now down 17.5 per cent on last year's levels.

Cattle disposals are down over 100,000 head against the same period in 1995 and live exports by 50 per cent, according to his information.

Mr Blake estimates that there is a backlog of 100,000 finished cattle on Irish farms sales of farm machinery have declined significantly, and building programmes have been cancelled.

His fact sheet makes depressing reading. It points out that many winter beef finishers have incurred losses of up to £150 a head, made up by a drop in prices, extra feed costs and deductions for over fatness.

"At the end I think the ultimate effect of the scare will filter down to impact most heavily on the sector least affected to date, the calf producer, and this will become most visible in the autumn and winter," he says.

"The major problem is that there is a continuing decline in overall farm liquidity across the livestock sector in other words the value of individual herds is continuing to decline."

THE concern is that some of the farmers involved might move into what he terms "negative equity", in other words, that the value of their stock would be less than their borrowings.

"What I want to do is to encourage farmers to come in and talk to us so we can work out solutions, and we can work out solutions.

"What we are looking at is a new set of norms, if you like, a new playing pitch where cattle farming will return again to profitability as soon as the adjustment phase to a lower price regime is put in place."

Mr Blake explains that AIB's policy towards farmers is to review every case on its merits and track record.

"We will be positive in our approach and reasonable in our attitude because we believe that when the new set of norms comes into play beef will be profitable again," he added.

We do recognise that there is a major problem with no easy solution but we also recognise that it's not of the farmer's own making. They are the ones who are bearing the brunt of this crisis and we will work with them."

Mr Gerry Farrell, of the Irish Meat Processors' Association, representing most of the major meat export plants, said the beef markets were "disastrous".

Exports of processed beef to France and Germany had "died" because consumers in both countries wanted to eat home produced beef.

The British market, Ireland's largest outlet for beef is in a very serious situation because the British cannot export their own beef. Middle Eastern countries are not taking Irish beef.

HE said EU intervention for Irish beef products would have to provide a short term answer, but the rules governing it will have to be changed to facilitate the slaughter and removal of heavy animals.

"We also have to look at a system of getting people back to eating beef again. Consumer confidence must be restored in the product.

"The current situation is that raw material supplies far exceed demand and if the Commission fails to act, there will be no home available for heavier cattle."

With the new EU proposals to deal with the crisis, he hopes slaughtering will continue more or less as normal into the winter.

"If farmers are to take up the calf slaughtering scheme, it will have to be done through the factories. Also if they want to put weanlings into intervention they will have to come to us and intervention for heavier animals will continue.

"What concerns the industry, however, is the level of profitability and that must surely change because of the changing situation.

Mr Michael Duffy, chief executive of An Bord Bia, says while there is a great deal of uncertainty about the future, the reopening of the Libyan and Iranian markets would do much to ease pressure on the build up of cattle on Irish farms.

"I have always said that recovery of the European market will be slow and much will depend on what will happen over the next few months and what decisions are taken in Brussels."

Latest market research showed a 90 per cent recovery of beef consumption in Denmark, the Netherlands and Sweden, but the summer had depressed the markets because consumption traditionally falls during holiday times.

In Britain recovery of was being put at 75 per cent Italy and Spain at 70-80 per in Germany recovery was still 50 per cent of pre March levels.

He predicts that Irish beef exports to Britain will fall back this year from 100,000 to 65,000 tonnes, but it was too early yet to say how other markets would finish up by the end of the year.

Despite all the gloom, he says, the Horizons event in Dublin in June had been most helpful in the marketing drive and benefits were already flowing from it.

"Exporters here are reporting to us that they have made valuable contacts which have and will translate into business in the future. Above all we managed at a difficult time to show the world's meat buyers that our system is grass based and unique and different from the rest of Europe," he said.

He accepts that a great deal of work has to be done to convince the European consumer of the purity of Irish beef, and a major EU funded campaign to that end is being arranged.