23rd June 2010

Scottish red meat processors’ fifth quarter drive generates £15.6m cash-flow improvement

The Scottish red meat industry has grasped an opportunity to convert by-products, which in recent years incurred heavy disposal costs, into saleable materials.  As well as reducing waste, these products are now generating a valuable income stream for the industry.

During the past two years (from 2008 – 2010) Scottish red meat processors have turned the £2.2 million cost of safely disposing of non-carcase parts into a £13.3 million revenue stream - a £15.6 million improvement.

This success story for the industry has been aided by a Quality Meat Scotland project, with £300,000 funding from the Scottish Government, to rekindle the trade in these fifth quarter products, such as edible offal, pet food and rendering materials.  At the same time, the volume of unsaleable materials and costs has been reduced.

The project, which was recently completed, saw specialists providing expert advice on the recovery of non-carcase parts, for example offal harvesting and preparation to meet customer specifications, which have been unused in recent years. A range of publications offering practical guidance on how to optimise the recovery of the parts was also produced by QMS.

When the project started, QMS estimated that adopting the processes could help generate an extra £3 million a year for the Scottish red meat industry. However, the ability of the industry to adopt the latest techniques, along with advice on making the most of the fifth quarter, saw a very positive response.

Scotland is now leading the UK in capitalising on fifth quarter opportunities, observed Donald Biggar, Chairman, Quality Meat Scotland.

Speaking during an industry breakfast at the Royal Highland Show today (Thursday 24th June) Mr Biggar said processors had also been successful in kindling additional export opportunities for the products.

“Every part of the animal - from the most to least valuable parts - has been raised to the same world leading assurance standards, so it’s a real waste for companies to be paying to dispose of parts of the animal which are recoverable and marketable.

“At a time when we are seeing a squeeze on the profit margins of our processors, it is of critical importance for companies to see where they can increase income, increase efficiency and cut costs.

“By embracing the opportunity to recover and sell fifth quarter products processors are gaining vital cash-flow from utilising the non-lean meat parts of the carcase. This is also saving the industry expensive disposal costs and assisting with sustainability targets.”

Alan Craig, President of the Scottish Association of Meat Wholesalers, commented: “The timing of this work could not have been better, coinciding with a period of negative returns for the meat sector when our markets have been running at extremely low levels.  This is therefore a valuable response from QMS to requests from our Association for technical assistance in rebuilding non-carcase markets, both domestic and export.

“I also wish to pay tribute to our own Association members for their part in this development.  Many businesses have made significant infrastructure investments in response to a slow, but valuable, uplift in global non-carcase prices, particularly for hides.  As a result, the losses suffered in other parts of the industry in recent months have been cushioned to a certain extent. As such, this project highlights the importance of partnership working both with QMS and the Scottish Government.  We would welcome further opportunities to explore other areas of growth in the future.”

Rural Affairs Cabinet Secretary, Richard Lochhead, said: “It is very rewarding to see that this support from the Scottish Government has played a part in giving processors the opportunity to realise millions of pounds of much-needed extra revenue.

“This project also shows our commitment to enabling businesses to cut waste. Maximising the full economic value of carcases makes sense on all levels - it generates additional income and reduces waste, thereby helping to deliver our goal of a sustainable future for the Scottish red meat industry.”

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