Wolf still at farmers' door as a temporary truce breaks out in cut-throat beef industry

Are farmers crying wolf? Again? Not according to one agriculture expert. Clear away the fog about premiums and grades and the sums are simple. A top quality, continental animal sold to the factory at 84p a pound yields a margin of £56 for the farmer. That "profit" takes account of all premiums.

"In other words," says Michael O'Connor, chief agricultural officer of Teagasc for Co Laois, "at 84p, a farmer would need to fatten 325 animals to earn the equivalent of the average industrial wage. To achieve even that, he would have to have 200 acres, be a textbook professional and work an unbelievably hard, seven-day week. "With a workload on that scale, he needs a workman but obviously can't afford one. To raise his income, he would have to get an off-farm job - but he can't do that without a workman . . ."

The 90p a pound, achieved by the IFA rebellion this week, will yield another £50 an animal. "It might seem a huge jump but that's still small in terms of labour and outlay," says Michael O'Connor.

At 84p a pound from the processors, according to Teagasc figures, farmers were producing cattle at a loss. Therefore, EU premiums, worth 38.5p a pound maximum last year for steers (which comprise only half the herd) and nothing for heifers, were the only source of income for many. Without them, they would have been out of business. "This is despite the fact that the industry had begun to make a substantial recovery, intervention was totally gone and prices in the US and Australia were at a historic high," said John Finlay, chairman of Co Laois IFA up to last Monday. Anyway, says Jer Bergin, vice-chairman of the IFA's livestock committee up to this week, "premiums were never meant as a subsidy to the industry nor to allow the industry to deny us the benefits of market buoyancy. We accepted that 1998 was a lean year and farmer prices reflected the difficulties in the industry. All we're asking for now is that prices would reflect the buoyancy in the market."

Some 70 per cent of processing is controlled by three companies: Larry Goodman's Irish Food Processors, Dawn Meats and Kepak. While Goodman's company logs twice the turnover of the other two, all three registered surprisingly similar profit margins: around £8 million for each £300m of turnover between 1996 and early 1998. Numerate farmers prefer their own calculations. Basing their estimates on record exports last year and returns from Egypt, the lowest-paying market, they reckon the processors made an average of £50 an animal, adding up to a £100 million between them. The fall and rise of Larry Goodman provided much food for thought on the barricades this week. How he managed to claw his way back from examinership to full control of the company in just a few years, perplexes many. However you look at it, they say, there has to be big money in the beef industry. Where is it coming from, if not from the farmers?

For many observers, the most shocking aspect of the standoff was the absence of trust between the two sides. While startled consumers puzzled over the same meat that cost £7 a pound over the counter being valued at 84p a pound at the factory door, farmers were trying to reduce a hugely complex argument to simple language: that they get paid for only 55 per cent of the slaughtered animal; that the "by-products" which often find their way to various retail counters - heart, hide, tongue, liver, etc - are not paid for at all; that once an animal is "finished" and ready for the factory, the farmer has just a fortnight in which to bargain; that withholding their animals in a strike wouldn't work because many processors have themselves turned producer.

Richard Booth, chairman of the IFA's national livestock committee a few years ago, says he knows of parishes in traditional winter fattening areas where up to 70 per cent of the farms have either gone out of business or are rented out to processors. Farmers broken by the BSE crisis or abandoned by the financial institutions are being paid 70p to £1 a day per animal to feed and keep them for the factories. "They're like employees on their own farms, providing a shopfront. You are looking at a creeping takeover by the processing industry over the producers. The processors are using their own control of these yards to control volume, which in turn controls price fluctuations. They have taken the power away from the farmer," says one farmer. It is claimed that one processor alone has a 40,000 capacity. "That means they're out in the marts competing with farmers but they can look ahead with their inside knowledge. They can take a loss to control the overall price. They can manipulate everything. But the farmer is taking a gamble from the word go".

To this, add allegations of a price-fixing cartel. "Beef is the only industry we know of which, regardless of scale or efficiency or location, quotes the same prices every week for the same raw material - and charged the same levy," says Jer Bergin. "It just isn't humanly feasible that they are not differentials in efficiency, etc, between plants."

An unnamed caller to the Pat Kenny Show this week, whose bona fides appeared to be accepted by the presenter, claimed as an industry insider to have seen both price-fixing and supply-rigging. He explained that processors co-operated to limit the kill, taking only 80 per cent of what was actually needed, thereby setting up an artificial surplus a few weeks hence when farmers would be obliged to sell their cattle at any price.

The processors' marketing also come in for severe criticism. "It's a yellow-pack mentality", says John Finlay. "There is no attempt at branding or marketing Irish beef in Europe. It's sold as a commodity, based purely on price, and nothing better."

So why don't farmers set up their own processing co-ops? They had majority control back in the 1970s and it all went wrong. Although armed with a high-quality product, poorly prepared farmer boards simply weren't up to the job of negotiating with British supermarkets. But there is also talk of "private individuals with political links and a lot of interference and blockages" which does not seem implausible placed beside the revelations of the beef tribunal.

"Even after a tribunal costing £40m, we still can't be sure there would be a level playing field. We would have to be sure we were all playing by the same rules," says Padraig Walshe, chairman of the IFA national dairy committee up to this week. "If the findings of the tribunal had been acted upon, it would have done a lot to straighten out the industry. So why hasn't it been done?"

Meanwhile, he and other farmers say they are surviving by not reinvesting. "Farmers are resilient. They just stop buying," says Michael O'Connor of Teagasc.

Jer Bergin says he has not been able to invest for three or four years. "The average livestock farmer is driving a 15-to 20-year-old tractor that he bought second-hand eight years ago," says Padraig Walshe. "You reduce your buying, reduce your levels of fertiliser, for instance. My loader is 24 years old. My `better' tractor is seven years. And remember that I'd be considered well off because I'm a dairy farmer with 100 cows."

Some 60 per cent of farmers now have off-farm incomes, adds Richard Booth, many derived from wives working elsewhere and subsidising the farm.

This week's action, they say with conviction, was a last-ditch stand for beef farming. The way they see it, they have succeeded where many distinguished protagonists have failed. But observers of this macho, cut-throat industry insist that there can never be a happy ending to this story. It is only a matter of time before the next bout opens new wounds.