Red meat bosses have warned farmers to consider the pitfalls of forward contracts before rushing into signing them.
Some, including Sir Don Curry, have been calling for such deals in a bid to put farmers’ businesses on a more secure platform.
Tesco and Sainsbury have both introduced forward contracts for farmers supplying beef cattle for premium ranges such as organics.
But although they can offer greater security, producers should not agree anything unless they understand all the ramifications of doing so, the MLC warned.
Duncan Pullar, the MLC’s cattle industry development manager, said: “It is important that producers understand their own production costs when entering into this kind of binding arrangement because then they are committed to the price. Some contracts are fixed price, some have a base price, and some have a plus or minus range on a given fixed price, depending on how the general market moves.
“If you go for a fixed price and the spot market goes up, you lose. If you go for one where there are base and ceiling prices and the market moves, then you get a share of that.”
National Beef Association chief executive Robert Forster said there was already concern that prices quoted in some forward contracts were too low.
“The NBA would say to farmers, that when a supermarket offers a contract, if you feel that you can make a margin, then go ahead. But if you can’t, then leave it alone.”
Greg Meenehan