Value Of FQAS Membership For Beef Finishers

NORTHERN IRELAND, UK - OVER the course of the summer, cattle supplies in Northern Ireland have been extremely tight, with intense competition for cattle and higher prices a feature of the trade.

5 September 2011

3 minute read

Europe

In this environment, buyers may be expected to become less discerning about the stock they purchase with throughput the priority.

However, it appears that despite tighter supply, the factories have remained quite rigid in their application of penalties on non-quality assured cattle.

The price reporting statistics from April through to August show that during that period the incentives for FQAS membership remain very strong, albeit, for some grades the price gap between FQAS / nonFQAS stock is slightly lower than it was in the first quarter of the year.

Table 1 shows that from April to August, 97 per cent of price reported steers / heifers in the gold box grades were quality assured. During that period, FQAS cattle were attracting around £40 per head more than non-quality assured stock.

For O+3 grade steers / heifers, in the last five months, the difference between quality assured and non-quality assured cattle was 14p/kg or £45 per head. This was slightly less than in the first quarter when the corresponding difference was 16p/kg or £51/head.

For U3 grade cattle however, the difference between FQAS and non-FQAS cattle was 10p/kg or £39/head in the last five months. This compares with a difference of nine pence/kg in Q1 2011.

Since 2001 a FQAS deduction has always been applied, albeit to a greater or lesser extent depending on the state of the market.

The standard deduction typically quoted for non-FQAS stock is £30/head. However, with an eight pence/kg incentive now being paid on quality assured stock that meet all other elements of factories’ specification (weight, age and grade), the cost of not being quality assured can now be greater.

Table 2 provides an example which summarises how these factors combine to impact the different prices paid to FQAS and non-FQAS producers.

It considers a producer who finishes quality assured stock and one who finishes stock that is not quality assured.

The example shows steers of the exact same age, weight and grade, with the same base price available to both.

Table 2 shows how at a base quote of 306p/kg, a quality assured bullock will attract a bonus price of 314p/kg or £1,193/head.

The non-quality assured animal will not attract this in-spec bonus and will also be penalised £30/head. This means that it will attract £1,133/head (298p/kg) for that animal. This amounts to £60/head of a differential.

A comparison of Tables 1 & 2 may prompt some readers to conclude that penalties on out -of-spec stock are not as great as they ought to be according to the pricing grid and associated standard bonuses and penalties.

It is however important to point out that this example only reflects the difference between two sample animals and the differentials outlined in Table 1 account for a much wider range of cattle.

These average figures will include examples of FQAS cattle that are also over-age, over-weight or underweight which will reduce the average price differential.

It may also include exceptions where some producers are not penalised so heavily on non-quality assured cattle. It is also worth noting that this is an analysis of FQAS / non-FQAS prices at price reporting factories.

Price differences between FQAS and non-FQAS cattle bought in marts and by non-price reporting factories may be different. Grade 293p 278p -14p -£45 95.0 per cent 303p 292p -11p -£40 97.4 per cent