Supermarkets Respond to Committee Concerns on Polish Beef Imports

28 APRIL 2020

Livestock & Meat Commission
The Livestock and Meat Commission for Northern Ireland
1a Lissue Walk
Lissue Industrial Estate (East) Lisburn BT28 2LU
Telephone 028 9263 3000
Facsimile 028 9263 3001

Thank you for your letter of 10 April 2020 regarding the Committee's request for information on a number of matters relating to Covid-19. I will try to deal with each of these matters in turn although there are some cross-cutting dynamics to these.

Polish Beef:

In the first instance thank you for providing a copy of the press release issued by the Committee regarding the concerns expressed about the retail of Polish Beef in some UK supermarket chains. The reasons for the commercial decisions which were taken by the businesses involved to keep supermarket shelves stocked over a short period have largely now been well communicated in the media. These decisions were taken at a time when consumers feared total shut down everywhere, potentially having to self-isolate their families for up to 14 days and when people were panic buying and clearing shelves of product as quickly as they could be stocked. As the pandemic lock-down has continued, consumers have largely stopped panic buying food as they become less anxious about the availability of food on retail shelves. They see that supply chains are working and that most food retailers have remained open with social distancing measures being actively employed everywhere.

The issue of imported beef is not a new one and as we discussed with the Committee at our recent meeting in Parliament Buildings on 12 March 2020 our beef and sheep meat industry relies very heavily on trade with trusted and reliable external and export markets.

The UK is the most important market for beef sales from Northern Ireland with up to 80% of Northern Ireland's beef output servicing this domestic market in normal times. The UK does traditionally import significant volumes of beef from EU and non-EU countries with Ireland being the main source of this supply. Looking at the most recently available data from HMRC we can see that for the first two months of 2020 just over 2,500 tonnes of Polish beef were imported into the UK, similar to 2019 and 2018 levels. Ireland was the major source of imports for the period supplying just under 30,000 tonnes of beef to the UK market in January and February 2020.

Trade is vitally important to our industry and if Covid-19 wasn't dominating everyone's agenda just now there would be some serious conversations needing to take place during this Brexit transition period about UK Trade Policy, the future relationship of the UK with the EU and the importance of ensuring free and frictionless trade between the two blocs.

From an LMC perspective we continue to develop and deliver programmes of activity to support the marketing efforts of our industry and to help create preference for our quality products in the marketplace. Through our consumer facing activity we educate and promote to consumers information about our industry and its quality products which allows them to make an informed choice when purchasing red meat encouraging them to support Northern Ireland Farm Quality Assured beef and lamb.

Impact of Covid-19 on the Beef Trade:

The Northern Ireland beef and sheep processing sector has a gross turnover of just under £1.4billion and contributes employment (directly and indirectly) to some 17,000 people. Approximately 20,000 farms in Northern Ireland (80% of all farms) have cattle and sheep and with sales in excess of £546million contribute over 25% of gross agricultural output. The Covid-19 crisis is causing very significant impacts across the entire beef supply chain.

Data collected from processors in Northern Ireland show that for 2019 domestic (UK) and export sales to food services / catering accounted for 35% of revenues with 65% coming from retail. The impact of Covid-19 lock-downs across the UK and EU has led to the almost complete closure of all food service and catering outlets which has led to severe market distortions and carcase imbalance issues. Retail has moved some additional volumes since the lock down but is hot compensating for the loss of food service and catering markets for high value cuts such as fillet steaks, ribeye, striploins and rumps which have plummeted in value. In addition to losses in these high value carcase meat cuts, sales of 5th quarter products and hides/skins have also been severely impacted with hide values having deteriorated by 75% in some instances.

In addition to losses in product value processors are also incurring significant additional operational cost increases to protect their work forces from Covid-19 by putting in place social distancing measures (such as installing new facilities and reducing capacity on lines), providing additional personal protective equipment (PPE) and enhancing training on safe operation of production lines. Businesses are also facing a host of other issues and risks which could add to the challenges outlined above. These include the potential for bad debts from customers operating in sectors where closures have been enforced and product already received has not yet been paid for; additional costs from freezing and storing high value cuts and; concerns about the extent and speed with which markets can recover from this ongoing crisis.

Before the onset of Covid-19 beef and sheep farms were already experiencing severe profitability challenges. As a result of the Covid-19 restrictions in place and decreasing product values outlined above, the farming sector is also now experiencing significant pressures on cattle prices. For the week ending 14 March 2020, before the UK lockdown was significantly stepped up, average steer prices in Northern Ireland were 332.4 p/kg; heifers were 333.2 p/kg and cows were 237.2p/kg. In the most recent price reporting week ending 18 April 2020 we can see that prices to farmers have come down significantly to 315.3 p/kg for steers; 319.0 p/kg for heifers and 209.1 p/kg for cows.

LMC's Role in the Current Crisis:

LMC has been working very closely with key stakeholders in the beef and sheep farming and processing sectors to assess and quantify the impact of the severe market distortions which have resulted from the Covid-19 Pandemic and the closure of food service and catering sectors. Retail promotion of higher value cuts may provide some relief to the loss of food service / catering markets for higher value cuts, but there are obvious limitations as to what can be achieved in such an uncertain and recessionary market place. LMC has an important role to play in the promotion of the beef and lamb industry in Northern Ireland and its high quality products. LMC completed a burst of beef and lamb advertising on 31st March 2020. This campaign featured on TV, radio and online and has been running since September 2019.