May 19, 2006

UK beef association says supermarkets cannot cushion prices for long

Supermarkets in the UK are fighting to resist price increases in UK beef as the end of the EU ban allows UK producers more outlets for their beef and thus higher prices.

For the time being, supermarkets, traditional customers of UK producers for the past decade, are having the upper hand in keeping prices down, the British National Beef Association (NBA) acknowledged.

However, chief executive Robert Forster warned that the tactic would backfire on retailers, saying that they could have constructed more secure domestic supply chains if they accept the inevitable-- that prices are going to change as UK beef re-enters the EU markets.

Supermarkets can develop long-term supply security if they send out encouraging price signals that would persuade breeders to sell domestically instead of cashing in on the foreign beef market, according to the NBA.

Processors were desperate to hold down prices because it was the only way they could break the chain of constantly paying more for cattle than they are recovering from customers, Foster said.

However, it would be extremely unlikely for supermarkets to cushion price for the  long-term, Foster stressed.

The action would either result in supermarkets accepting that UK cattle prices are moving onto a permanently higher price or force more processors to seek out export customers who can keep them in business by paying more, he said.

Forster added that the current market is both supply and demand driven. If supermarkets do not accept that the only way they maintain supplies of beef is to pay more, they would lose UK beef to foreign customers.