Where's the beef?

By Camilo Thame Business Co-ordinator thamec@jamaicaobserver.com

Wednesday, December 07, 2011

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The domestic beef industry is showing early signs of revitalisation.

However, full recovery of what was a near self-sufficient sector two decades ago is threatened by poor economic conditions and a weak policy framework.

Jamaica Broilers (JB) phased out its slaughter operations this year due largely to a dramatic fall in grain-fed beef as a result of poor economic conditions. The silver lining, however, is that sales of weaners grew substantially, which lead to the modification of JB's farm concept to that of a "cow calf" operation.

JB's CEO Chris Levy told the Business Observer that there has been significant interest in buying cattle. "We have moved our entire herd into breeding," he said. According to its 2011 annual report, the agroprocessor has increased and improved its pasture lands, as well as its herd of breeding cattle, "with the intention being to expand further during the 2011/2012 operating year".

Investment in cattle presently has many downsides, including the large capital outlay required and the vulnerability of the sector to import competition and praedial larceny. However, local cattle expert, Paul Jennings believes it can yield positive financial returns, but it requires a long-term view. "Cattle is not a low hanging fruit. It's a long term investment and needs seven years to become profitable."

On the other hand, Jennings doesn't think it will become attractive without clear policy support and political consensus that "food sovereignty can safeguard food security while creating wealth".

The Government recently announced that it would throw it support behind plans to significantly boost production of beef to meet 60 to 65 per cent of local consumption needs by 2020, adding that the target was achievable.

Levy also believes the food security aspect of the revitalisation of the sector "makes it absolutely critical", while he figures it will take five to six years to increase the national herd from 30,000 to 150,000-200,000 heads.

Only 10 years ago local beef production totaled 10.9 million kilogrammes (or 60,500 head of cattle slaughtered) but when a mad cow disease scare hit the region, prices fell dramatically and so did production. Last year, local beef production totaled 5.3 million kg.

However, for some time prices have recovered, even while production continues to decline. Jennings believes lack of policy support is the underlying reason for that.

"An import dependent strategy resulted in reduced per capita intake of beef and milk at significantly higher costs while decimating the local cattle sector. Poultry gets real protection with duties totaling 260 per cent while only the common external tariff (CET) of 20 per cent — plus additional stamp duties — is applied to beef imports."

Indeed, domestic poultry meat production has increased from 82.9 million kg in 2001 to 102.5 million tonnes in 2010. Meanwhile the price (in US dollar terms) of imported beef has increased by 46 per cent over the last 10 years.

According to Jamaica Livestock Association (JLA) chairman Henry Rainford said that beef trimmings import is also creating a serious problem for local farmers. "They can't get a good price."

Jennings explained that trimmings — fat trimmed from the beef carcass — used to go into stock for pet food in the US but found its way into a more lucrative export market, where it is being used in foods such as "patties and burgers".

"It's basically a throwaway product that killed the cattle industry in small and developing countries. It has seen significant growth here since 2005. What was almost non-existent before 2005 (imports totaling 49,500 kg) has now reached 1.5 million kg," he said.

Even if Government clamps down on imported beef and trimmings other major hurdles exist, such as land acquisition.

"If you have to buy land it's a lot of money but if you have land it can work," figures Rainford.

The amount of land being used for agriculture have reduced significantly over the last decade or so. Lands engaged in agriculture totaled 325,810 hectares in 2007, down from 407,434 hectares in 1996.

Jennings suggests the establishment of an inventory of idle lands could shed some light on the lower utilisation but he believes the Government is ineffective in reclamation of mined lands. "There is over 100,000 hectares tied up in bauxite."

Windalco, which core business is refining bauxite into alumina, operates commercial dairy and beef farms as a measure to ensure that its bauxite interest is not at risk. Last year it sold three per cent of the cattle slaughtered for beef and twice as many to other beef cattle farmers.

"For Windalco, beef production is a marginal enterprise but provides for the optimal use of lands that are equally marginal, and limited in water supply. As with dairy operations, expansion of beef operations is dictated by the Company's mining plan to meet alumina production targets. Any consideration for an expansion of dairy and beef cattle production is therefore dependent on the company's mining plan as all commercial activities are currently utilising lands scheduled for future mining," said Windalco in response to written queries.

The company did highlight another major factor that continues to plague the agricultural sector.

"Since January of this year, we have already lost 41 animals with a cumulative value of ($2 million). These losses have had a significant negative impact on our 2011 revenue and our operational expenses have increased as we try to protect our investment."




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