But it could give the companies more power to stand up to the major retailers
A deal between Dunbia and Dawn Meats has raised concerns over competition, but could allow the company to stand up to the supermarkets, farming groups have claimed.
The companies announced a strategic partnership had been completed and approved by regulators in a joint venture which will see them combine the UK businesses, trading as Dunbia.
In Ireland, Dawn Meats has acquired Dunbia’s operations. The combined businesses will process about 900,000 cattle and 2.6 million sheep annually.
NFU livestock board chairman Charles Sercombe said both companies had assured the industry they did not expect plant closures.
“There should still be good competition. Obviously this is part of an inevitable rationalisation,” he said.
“But it will give processors more power and strength when negotiating with supermarkets.”
Mr Sercombe urged both companies to continue trading at current standards and asked both to sign up to the processor code.
“It would give us more confidence,” he added.
He said with Brexit there was an opportunity for increased dialogue and transparency between processors and producers to ensure everyone had a fair return.
“I would really just hope all processors would try to work with farmers as there is uncertainty with Brexit. All the major processors are worried about supply.”
While he acknowledged there was traditionally some nervousness about the influence of Irish companies in the British market, he said it did not matter who owned the plants as long as they were open and transparent.
“If they can be competitive on a global market, it will hopefully improve returns for farmers and this is what we are all about,” he added.
NFUS livestock committee chairman Charlie Adam was concerned reduced competition could allow Dunbia to dictate what price was paid to farmers.
“But on the other hand, a bigger company may be able to stand up to the big retailers more,” he said.
He added it was important there was the capacity to deal with the livestock produced by Scottish farmers, but this should not be done by squeezing them on price.
“We have seen how low incomes are. We do not have the margin to be squeezed,” he said.
“We do not want to see any plants closing. We would be looking at their facilities at Elgin. I very much hope it will stay.
“If it means they are in a position to be more viable and profitable and invest, then it has to be a good thing.”
Mr Adam added he hoped the partnership would not affect efforts to create a code of practice for abattoirs and called for the industry to agree a code of practice on notice periods and consistent messages of what the processor wants.
Dunbia’s headquarters will remain in Dungannon, Northern Ireland, which Ulster Farmers’ Union (UFU) said was positive for the industry.
It also warned joint control over Linden Foods between Fane Valley and ABP Food must deliver for farmers, following approval of the deal from the European Commission.
The Commission concluded it would not adversely affect competition in the EU Single Market.
UFU deputy president Victor Chesnutt said the success of both deals would be judged on the returns it can generate for cattle and sheep, with profitability on farms so low.
But he said there were always concerns about how much genuine competition there was between Northern Irish processors.
“The combined resources should put them in a better position to improve the efficiency of their operations and the marketing of their products to new and existing markets,” he said.
He also called on processors to offer more stability to farmers and develop new payment conditions which can offer farmers protection from volatility.