Difference In Price For FQAS and Non-FQAS Prime Cattle
NORTHERN IRELAND, UK - Over the first quarter of 2010, there has been a significant difference in the finished price for FQAS and non-FQAS cattle in Northern Ireland.
16 April 2010
3 minute read
As Table 1 shows, the differential is most prominent in prime cattle at between 9 and 14p/kg difference between FQAS and non-FQAS cattle, depending on grade. A year ago the differential was between 4 and 8p/kg.
One reason for the wider differential is the new payment system which the factories have been operating since last November, which was designed to promote the production of “in-spec” cattle. The factory specifications generally include criteria on FQAS, grade, age and weight. Some other requirements apply in certain factories.
Under this system, the factories operate a base price, upon which they pay an 8p/kg bonus for “in-spec” cattle. Cattle that fail to meet all of the bonus criteria attract the base price and those that weigh more than 420kg, are older than 30 months or are non-FQAS are subject to further deductions.
The quoted differential of £30/head between FQAS and non-FQAS cattle has been in place since 2001. However, when you consider the fact that a bonus is now paid on any FQAS cattle that meet all other criteria in the specification, the benefit of FQAS approval is now potentially greater than it was previously. This is borne out by the figures for the last quarter which show that the price differential between FQAS and non-FQAS stock was 14p/kg on O+3 prime cattle. In the first quarter of last year the corresponding figure was 8p/kg. In the first quarter of 2010 the factories paid an average of 9p/kg more for quality assured U3 grades. The corresponding figure for the same period last year was 4p.
At this stage, the statistically astute reader may ask whether non-FQAS prices are lower now because of any tendency for these cattle to be over-weight and over-age and therefore prone to weight and age deductions associated with the current pricing grid. With this in mind it is worth examining FQAS versus non-FQAS prices for cattle which meet all other criteria in the specification. This analysis (not tabulated) reveals very similar results to Table 1, with the differential between 9 and 14p/kg over the range of the selected grades. This would appear to show that the factories have become more rigid in their applications of deductions on non-FQAS stock.
Readers will note the contrast between O and U grades when it comes to the difference in the price paid for FQAS and non- FQAS cattle. It would be tempting to assume that the factories are more flexible when it comes to penalising non-FQAS, U-grade stock to secure supply of these better carcases. While this is possible, it should be noted that one of the main reasons for this contrast is the “perhead” nature of FQAS deductions and its greater impact on the “pence per kilo” price of lighter cattle than on heavier cattle. With U grades typically heavier than R and O grades, the “pence per kilo” differential will always be narrower on U grade cattle.
Further Reading
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- | You can view the full report by clicking here. |
FQAS cows attract higher prices in first quarter While the introduction of the new pricing grid last November did not affect cows, the price differential between FQAS and non-FQAS cows has also widened in the first quarter of 2010. In the first quarter of 2010, FQAS, O+3 grade cows attracted 8p/kg more than non-FQAS O+3 cows (Table 2). In the first quarter of last year the differential was only 1p/kg.
Looking at the entire category, it is clear that the deductions on non-FQAS cows are being applied more consistently in the first quarter of 2010, compared to the same period last year. In the first 13 weeks of last year, the average deduction on non-FQAS cows was 8p/kg. This year so far, the average deduction has been 13p/kg.
With cow beef increasing as a proportion of the kill, this movement towards greater deductions on non- FQAS cows may reflect a greater desire in the plants to process farm quality assured cow beef. At the moment almost 75 per cent of cow beef is farm quality assured.
These wider differentials may encourage more suckler and dairy producers to sign up to the NI Beef and Lamb Farm Quality Assurance Scheme.
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