Following a report prepared by Dr Pat McCloughan of PMCA Economic Consulting, IFA president Joe Healy called on the Minister for Agriculture Michael Creed and the Competition and Consumer Protection Commission (CCPC) to address the proposed merger and its implications on the industry.
Healy said: “This report is very clear on the competition concerns in the beef sector, the income pressures that exist for livestock producers and the impact that any weakening of competition would have on their livelihoods.”
He said the main conclusion of the report is that the primary procurement market for farmers selling cattle in Ireland to the meat factories is characterised by weak competition and the proposed deal is likely to weaken competition even further, through a ‘substantial lessening of competition’ (SLC).
Leinster concentration
In the report, McCloughan pointed out that ABP and Slaney combined currently account for 25.8% of all cattle slaughterings in the state. When the market is narrowed down to premium cattle of steers and heifers meeting the MII grade and weight specifications, this rises to 36.2% of cattle.
Using competition economic analysis based on the HHI measure of market concentrationthe report shows that across the full national geographic market, the HHI Delta is 469 for premium cattle purchased.
The analysis also reveals that when the more narrow relevant market of the South Leinster region is used, ABP and Slaney combined would have 44% of the premium cattle kill and the HHI Delta would rise to 959.
Dr McCloughan explained that a HHI Delta above 250 can be a cause of concern and when taken in the context of a market sector with high regulatory barriers to entry and high switching costs as well as other sources of weak competition, this raises serious competition concerns.
Dr McCloughan said “The market share of Slaney is much higher in the narrower geographic market of South Leinster and it emerges that Slaney is the closest competitor to ABP for premium cattle. In each and every analysis, the HHI Delta exceeds 250, by some margin”.
IFA national livestock chairman Angus Woods said, “Competition in the beef and lamb trade is always a contentious issue between farmers and factories. The Minister and the relevant authorities must be able to guarantee farmers that there is maximum competition operating in the market”. He said the report also highlights the necessity for DG Competition to examine the competition issues around rendering and factory feedlot cattle as well as the processors relationships with retailers.
An ABP spokesperson said: "ABP Food Group is in a regulatory process with the EU Commission regarding the proposed 50:50 joint venture with Fane Valley Co-Op in relation to Slaney Foods.
"The company is aware of the IFA report and is confident that the transaction will be approved in the coming months. It is not appropriate to comment further while this process is ongoing."