After almost 10 years, and several false dawns, Monday, November 7, 2005 was a watershed for the beef industry. This was the first day since March 20, 1996 that cattle aged over thirty months could go into the food chain.

By late-January 28 plants had been approved to process cattle aged over thirty months with a further three in Northern Ireland. More are expected to gain approval in the coming months.

Cow slaughterings for the food chain have been relatively modest since the OTM rule changed. From a total of 958 head in the first week (w/e 12 November) they gradually increased to more than 3,300 head per week by mid-December. Numbers have recovered post Christmas to total 3,430 head by w/e 14 January. Over the period, the Over Thirty Month Scheme (OTMS) continued to operate and the vast majority of cows were disposed of by this means, rather than sold back into the food chain. In the nine weeks following the OTM rule change, 88% of cows were disposed of into the OTMS and only 12% re-entered the food chain.

The industry is now facing a critical period as the OTMS ended on 22 January and all cows born after July 1996 must be sold into the food chain.

Market Impact With demand for beef strong in the run up to Christmas, the change in the OTM rule coupled with the modest number of cows which were slaughtered for the food chain meant little adverse impact on prime cattle values. These remained firm throughout the period and at 193p/kg deadweight during December were up 17p/kg or 10% compared with December 2004.

Immediately following OTM rule change, only better quality animals have been sold for human consumption while the OTMS has been used for the poorer ones. Prices recorded at auction markets show a clear differential for beef cross cows when compared to dairy breeds . While dairy breeds have averaged 48-52p/kg liveweight beef bred cows have averaged 55-60p/kg liveweight, an average difference of 7-8p/kg liveweight.

Deadweight cow prices also confirm a differential according to the quality of the animal. These have broadly ranged from 100-110p/kg deadweight for P/-O conformation animals up to125-35p/kg deadweight for R grade cows. This compares favourably with the OTMS compensation rate during December of 43.7p/kg liveweight and 87.3p/kg deadweight.

Challenges ahead The immediate challenge is that with the ending of the OTMS on 22 January there is the prospect of a significant increase in availability of domestic cow beef. The concern is further heightened by the fact that exporting a proportion of this beef will not be possible at least until April and possibly May.

It is vitally important that the major retailers accept this product into their supply chains if not for part of their retail offering at least using it as an ingredient in their processed products such as beef burgers or beef based ready meals. There is scope for significant volumes of this product to be used by the major burger manufacturers and the further processing industry.

If this can be achieved in the coming weeks and if, at the same time, import volumes are adjusted downwards then the impact not only on the cow price but possibly more importantly on the prime cattle trade can be largely mitigated.

If this does not happen, the likely outcome will be for the market to come under extreme pressure and, if it does, then the EU Commission’s promise of the introduction of measures to support the beef market will need to be activated swiftly.

However there are a number of factors which, if acted upon, could reduce the potential pressure on price the industry may face in the coming weeks:

• Cow disposals were high in December and into January so hopefully most of the poorest quality cows born after July 1996 have been disposed of into the OTMS. Coupled with milk production being under quota, cow slaughterings are expected to fall over the next few weeks.

• Longer-term culling policies need to be developed - after 10 years of producing for a disposal scheme, animals now need to be prepared for the food chain again.

• It is vital that only properly finished cows are sold into the food chain during this period as the market place adjusts. Producers should seek professional advice regarding feeding regimes and find out what type of animal is being sought by abattoirs or buyers at the auction markets.

• There is likely to be a clear preference for cows meeting the requirements of beef farm assurance schemes. An Eblex survey highlighted a 6.7p/kg difference between farm assured and non-farm assured stock. If the same is replicated for cows that could be worth up to £37 per head.

• EU hygiene rules introduced from 1 January 2006 are expected to reduce the number of emergency slaughter animals entering the food chain. Since diseased or lame animals will no longer be able to enter the food chain, this could result in many of the poorest quality cows being disposed of as fallen stock rather than entering the food chain.

• Prime cattle producers could reduce their risk by limiting the number of cattle they intend marketing in the next few weeks. The extra cow beef available has the potential to reduce the value of forequarter from prime cattle and ultimately their total value.

• The EU beef market is in a deficit situation and that is likely to remain the case in the medium term. Even after the full impact of OTM rule change takes place in the UK the forecast net import requirement of the EU-25 is 350,000 tonnes in 2006. Once the export restrictions are lifted there are likely to be export opportunities for prime beef, cow beef and possibly live cattle exports.

Provided a number of these factors are acted upon then this should allow enough time for the market to adjust and adapt without undermining confidence.

Under the new conditions, the move from a flat rate pricing structure in the form of OTMS compensation to a pricing structure differentiated by the quality of the animal produced will, on the whole, be most beneficial for the suckler industry.

The last piece of the jigsaw needed to fall in place is the removal of the current export restrictions.

When all the export restrictions are finally lifted can we truly put the spectre of BSE behind us.

With access to a European market of 400 million consumers in 24 other EU member states this will present real opportunities.

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