There was no evidence that the Irish Meat Association, which represents beef factory owners, has been operating a price-fixing cartel, Mr Peter Bacon, an economic consultant, claimed in a report presented yesterday.
Mr Bacon's conclusions were hotly disputed by the Irish Farmers' Association. Farmers picketed meat plants over the issue in January, and his report, Irish Beef Processing - Trends, Market Structure and Value Chain Analysis, is the meat association's submission to a subsequent inquiry. Mr Bacon compiled the report with Prof Moore McDowell and Mr Vincent Hogan of the economics department at University College Dublin.
"If the Irish Meat Association members were attempting to operate a cartel, they have done a very bad job," Mr Bacon told a press conference in Dublin.
The main finding was that cattle prices were determined by market forces and the market suitability of cattle. It said the price paid to farmers for 03 grade bullocks, the benchmark animal in slaughtering, had fallen from about 100p a lb. in 1993 to 8085p a lb. in 1999.
It concluded that this was primarily due to three factors: reform of the Common Agricultural Policy, the World Trade Agreement and the BSE crisis.
Mr Bacon said that while the price paid to farmers for beef had fallen, EU premium payments to compensate had risen from 9p a lb. to 35p in the same period. However, output of cattle increased by 22 per cent in the same period while it fell by 4 per cent in the rest of the EU.
According to Mr Bacon, the beef factories were making estimated profit levels of 2 per cent of turnover in the period, and it was hard to see how this represented an industry which was exploiting market power to drive down input prices.
An analysis of the 1998 data on the value chain for the purchase of cattle through to sale of beef on the domestic and export markets showed the gross value added at processing was 21 percent, an insufficient margin to cover costs, leaving processors with an estimated loss of 1p a lb. on every animal slaughtered.
While members of the Irish Meat Association dominated beef-processing, its members accounted for just 25 per cent of production for domestic consumption, equivalent to 3 per cent of IMA total production. "IMA member firms find themselves in the strange position of controlling production which dwarfs domestic consumption, yet they are not in a position to influence the domestic market price ex-factory," the report said.
Mr Tom Parlon, the IFA president, who led the farmer blockade of meat plants in January, rejected what he said were attempts by the IMA to gloss over the reality of the cartel which held down cattle prices last autumn and led to the dispute.
He described the report as "a selected historical analysis", and said it confirmed the dominant position of the IMA's members in the industry yet ignored the abuse of market power by the factories in the absence of live exports of adult cattle.