More than £1 million is being wiped off the value of British beef each month due to changes to cattle payment grids, MPs on the Environment Food and Rural Affairs (Efra) committee heard.
Giving evidence in the House of Commons, industry stakeholders said a lack of choice when sending animals for slaughter and processors’ tendency to alter specifications with little notice meant producers’ profit margins were taking a hit.
In some cases, the grid and grading systems were used ‘to drive down the value of cattle’, MPs found.
Steve Conisbee, the NFU’s beef group chairman, said as a result of the changes about £1.1 million a month had been wiped off the face of the value of British beef.
While processors were not paying this amount, it had not been deducted from supermarket prices.
Mr Conisbee said it showed ‘they are hitting us in fines but not rewarding us by the same proportion’.
Chris Mallon, chief executive of the National Beef Association, added: “When cattle are in short supply, the grading is more lenient; when cattle are plentiful grading is a lot more difficult.
"Your ability to negotiate with the processor on your grading depends on his supply of cattle at the time, which takes away from the grading system being independent and from the reason for grading."
The hearing discussed the possibility of a mandatory code-a suggestion supported by Mr Mallon.
"There is no point in having a voluntary code [as we have now]. Not everybody signs up. You have no enforcement powers. What you are really hoping is that they will be nice to you,” he said, adding a lack of competition had fuelled the imbalance.
"A small number of companies are probably killing 70 per cent of cattle in the country; there will be four or five of them. When they are in certain areas, they are the dominant force in that area,” he added.
"If you are a smaller farmer, your ability to appeal and the fear of the retribution that will come back because it will be seen that you have caused a bit of hassle is actually quite high."
Efra chairman Neil Parish said he intended to call retailers and processors before the committee later this year.