Attractive Premiums Paid For Organic Cattle

NORTHERN IRELAND, UK - Throughout the recession there has been ongoing speculation about the impact of reduced consumer confidence on the ability of retailers to market premium products. Organic produce was considered to be one segment most at risk from a consumer austerity drive.

10 February 2011

2 minute read

Europe

While the organic sector appeared to be under pressure generally, it would appear that demand for organic beef remained reasonably strong in 2010. Figure 1 (below) shows how demand for organic beef has performed during the last three years and in general the trend has been an improving one. In early 2008, before the full effects of the recession struck home, demand for fresh organic beef was strong and in line with the seasonal trends for beef in general with demand under pressure throughout the spring and summer of that year.

However, during the economically turbulent winter of 2008/09 there was no recovery in organic beef demand and sales volumes were flat throughout that winter and through the rest of 2009. The blue line in the chart illustrates the weakness in GB demand for fresh organic beef throughout 2009, relative to 2008 levels.

However, a recovery ensued in 2010 with demand picking up strongly throughout the summer and into the winter, relative to 2009 levels. By the end of 2010, demand for organic beef was 63 per cent higher than 2009 levels and 14 per cent higher than demand in 2008. However, it is worth noting that beef demand was generally stronger in 2010 (+3 per cent year-on- year) and the increase in organic demand may reflect this general increase in demand.

The improved demand appeared to bolster farmgate prices for organic beef in NI and in January 2011 the price differential between organic and non-organic beef was 50p/kg on average. The average price paid for U3 steers and heifers in January 2011 was 285p/kg. During that period, cattle of the same grade that were produced on organic farms were awarded an average price of 345p/kg. The figures in Table 1 indicate that the strongest organic premiums are paid on the better grades.

These farmgate price premiums were greater than what was available in January 2010. Last January the premium on U3 organic steers and heifers was 48p/kg, compared to 60p/kg this year. Likewise, the premium on O+3 last year was 29p/kg.

This year it is 46p/kg. For the small number of NI producers that are engaged in organic beef production, the increase in demand and these improved premiums will be welcome, given the potential for this type of less intensive production to incur greater costs and reduced efficiencies.