Examination of Witnesses (Questions 240
- 259)
MONDAY 23 FEBRUARY 1998
MR LAURENCE
BERNTHAL, MS
DAWN BLAKE
and MR JOHN
COLLIN
240. Has that significantly affected meat? How
big is mutton as a proportion of your sale of sheep?
(Mr Bernthal) We do not process any mutton, ours is
just lamb. I am not going to predict the next question, I will
leave you to ask the question.
241. Obviously there are greater problems on
the de-boning of mutton for the export market but we hopefully
will not take it down that particular road. I think what will
be interesting for the Committee to look at apart from where you
exert your influence, and you have indicated to us where that
would be, is how many different firms would be involved in the
process from the farm gate to the shop? How many players are there
involved?
(Mr Bernthal) There are two packers, two processors,
who would feed in from a slaughter base perhaps of half a dozen.
A slaughter base of half a dozen feeding two primary processors
into one distributor into the retailer.
Mr Jones: Thank you very much.
Mr Thomas
242. Mr Bernthal, could you turn to paragraph
3.2. If we deal for a moment with the cost analysis that you have
prepared on that page in that paragraph dealing firstly with lamb.
You refer to a price of £34.58 being the average value of
a lamb to a farmer, in other words what he gets at the farm gate.
Is that the correct way to put it, £34.58?
(Mr Bernthal) Yes, you are right in your interpretation
of that. If I can just say before we start to go down this avenue
that this was not intended to be an exercise in an accountancy
procedure. I am not an accountant, I am a butcher. I was trying
to use these to illustrate nominal values. It is very, very difficult,
as I said in my next memorandum that came to the Committee, to
put absolute values to everything. Initially we are dealing with
live animals and, as with humans, each animal is different. It
is then subject to a very, very complicated process which in effect
can affect final values and some of the process there is butchery
skills and indeed the—
243. Can you just talk us through it. This is
an element of your evidence which I know we are particularly interested
in as a Committee. £34.58. This equates to 80 pence per live
kilo. Then you refer to the kill out percentage—a rather
inelegant phrase might one call it. That is the yield, is it not?
(Mr Bernthal) Yes. Forgive me for going into terminology
there.
244. I think we are interested in it, Mr Chairman.
44 per cent is what you can actually use from the carcass, is
it?
(Mr Bernthal) This is where we start to drill into
some of the difficult areas of meat processing. Forgive me if
I start to get into terminology and if anybody struggles with
the terminology please ask. The areas I was trying to cover in
this is we start with a live animal and that animal has a value,
generally derived from either a livestock auction or a deadweight
contract basis. In the case of the lamb I took an average of 80
pence per live kilo because on Friday that was the prevailing
rate for lambs on the standard quality quotation. That would give
you a value of £34-£35 for the lamb as it stands. The
animal is then slaughtered and it is slaughtered and dressed in
accordance with regulations and it will give you a kill out percentage
possibly of 44 per cent. That kill out percentage will vary, will
vary from lamb to lamb and I think it is true to say, and John
will correct me, it will vary from month to month and it will
vary according to the age of the sheep involved as well. I would
labour the point that is not an absolute value, it is a nominal
value. Potentially it is a 44 percentage of kill out.
245. That next figure you have got of £43.53,
where does that come in?
(Mr Bernthal) That would be for the sale of that carcass
to the processor. That includes the skin.
246. So you have gone up from £34.58 to
£43.53 at that stage.
(Mr Bernthal) That is the carcass and the value of
the skin. Again, the value of the skin can vary quite dramatically
throughout the lambing season.
247. Then you have to take off what the abattoir
has to pay by way of expenses.
(Mr Bernthal) Indeed.
248. What do those include?
(Mr Bernthal) John, do you want to take this?
(Mr Collin) Obviously slaughtering charges, OVS charges,
Meat Hygiene Service charges, general overheads.
249. That has gone up quite considerably, has
it not?
(Mr Collin) Quite considerably. The disposal now of
inedible offals is costing an absolute fortune to get rid of.
250. Have you built that into the figures here?
(Mr Collin) I got these figures from one of our suppliers
of lambs and that includes everything, every overhead. As you
can see it is 44 pence profit per carcass, which is not a lot.
(Mr Bernthal) Any more charges that are levelled against
the sheep industry potentially could have quite a dire effect
on all of those costings.
251. So we are left with 44 pence by way of
profit at that stage?
(Mr Bernthal) Yes.
252. If you could continue your evidence from
there, please, and take us through the process. You refer to a
figure of £61.12 as being the cost to the retailer, not the
customer, because of course we have got to add on to that £61.12
the profit margin for one thing plus the cost incurred of generating
the final sale to the consumer.
(Mr Bernthal) If I can just rewind it slightly there.
We have the carcass, and forgive the picture that I paint, we
have the carcass on the hook and it then has to be processed.
If we take the carcass as being 100 per cent of what is now a
dead lamb it is then cut into primals.
253. Just primals at that stage?
(Mr Bernthal) Just primals at that stage. Ninety six
per cent of that carcass will then go to primals.
254. The yielded meat is then packed. So the
£61.12 includes the packing?
(Mr Bernthal) Indeed. Again, if I could just try and
explain part of the process without trying to get too complicated.
We started with the lamb, we then got 44 per cent of the lamb
to a carcass and from that carcass you then have 96 per cent of
that into primals. At each stage it is losing something along
the way. Then there is a yield of around 75 per cent of primals
into retail meat packs. There is 25 per cent more which will not
get translated into retail meat packs. That is quite significant.
255. You refer to the cost to the retailer at
that point as being £61.12 which includes process and profit.
(Mr Bernthal) That includes costs and profit and loss
as well.
256. And?
(Mr Bernthal) Loss.
257. Sorry, loss of?
(Mr Bernthal) Loss to the processor.
258. Does that happen?
(Mr Collin) Very often.
259. Could you expand upon that.
(Mr Bernthal) Yes. We were talking about economies
of scale earlier. If a plant is not working to capacity potentially
what is a very thin margin anyway if they were operating at capacity
can quite easily turn into a deficit.
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