How big a deal is Australian beef production on the world stage?
Compared to total world protein supply, Australian grassfed and grainfed beef production accounts for less than half of one percent, as the above image graphically illustrates.
“Needless to say we are a very, very, very small piece of the puzzle,” MLA chief economist Ben Thomas told last week’s BeefEx feedlot industry conference at the Gold Coast.
So we are pretty small global players. What does that mean for our future?
Mr Thomas’ message was that Australia should capitalise on its grain feeding systems to reduce the variability of supply and maximise production.
In the US, where the vast majority of cattle are lot fed, cattle produce about 600 pounds of beef per head on average.
That is roughly double Australia.
Here, where grassfed systems dominate (at any given time the proportion of cattle slaughtered in Australia that are grainfed is between 35-39pc), beef production equates to about 300 pounds per head.
Because Australia is such a small piece of the puzzle, were we to ramp up grain feeding to a level where our beef production per head matched the US, our beef production under that scenario would still only account for 0.9pc of world protein production.
“So we are not going to flood the market,” Mr Thomas said.
“And by producing more we are going to be in a better position to capitalise on growing global demand.”
Mr Thomas posed this question to the BeefEx audience: “How do we get Australian beef exports to at least challenge Brazil and stay well ahead of where US exports are?”
The wild swings that can occur in Australian cattle supply have been well documented through the recent drought years. Australian weekly cattle slaughter shot up to 160,000 in 2014 before dipping below 120,000 head this year.
It may take until 2020 for weekly kill rates to return to what we could consider normal levels.
Australia’s national herd has struggled to get over 28 million head, largely because of the limitations of grass and stockwater.
Having a greater proportion of cattle on feed, Mr Thomas told Beefex, would go a long way toward reducing huge fluctuations in supply, and in turn prices.
Feeder cattle prices in Australia have risen by 140 percent since 2014.
In the same period, the finished article – represented by the 100-day grainfed over-the-hook indicator – has risen by only 50pc.
This disconnect appears set to continue with feeder cattle prices likely to remain high for at least another six months, as the nation goes through a herd rebuild in the wake of recent widespread rain.
At the same time the finished article will continue to be pressured by growing global production from Brazil and the US.
While feeder cattle prices are set to remain high, grain prices are expected to remain fairly low for the next decade, according to OECD forecasts, which should help to encourage more cattle into feedlots.
“Stable and consistent supply is where the feedlot industry can come into its own and build production and capitalise on demand,” Mr Thomas said.
“To seriously build that herd again, being able to leverage grain to finish more cattle would go a long way toward alleviating some of that pressure.
“If you think about how small Australian beef production is, as a contributor to all protein production, if we were to increase our production by 10 or 20pc, we are not going to flood the market and have to worry about prices collapsing, we just don’t produce enough for that to be the case.”