RECORD high fuel prices and their impact on disposable income are already being reflected in some big falls in Australian domestic wholesale beef prices in the past few weeks.

Fuel price shock is adding to the accumulation of other factors that have driven down wholesale meat prices sharply since around the middle of March, trade sources told Beef Central yesterday.

While trimmings and lower-value cuts are so far less affected, grainfed and higher quality wholesale meat prices have fallen by $2-$5/kg over the past couple of weeks – and in places as much as $10/kg.

It’s probably the biggest wholesale market price correction seen since the COVID era, several domestic trade sources told Beef Central.

The impact and the reasons behind it are already being seen in lower slaughter cattle prices this week – both direct consignment and saleyards-sourced.

Trade sources stressed, however, that the domestic wholesale price trend had started before the alarm around the impact of fuel prices and supply had set in.

“The domestic market was already under pressure in general,” a large NSW wholesaler said this morning, “but latest fuel prices have only added to that.”

“It’s already evident at the retail (supermarket and butcher shop) level, but there are in fact so many competing factors in play – fuel shock is just one of them.”

“The big wholesalers are all aware that Australia triggers its China quota some time soon (see yesterday’s story). They feel there is going to be beef directed out of China back into the domestic market.

“At the same time, Japanese and Korean customers are doing the same thing: sitting back, and waiting for the China quota to trigger, in the expectation that Australian export beef prices will come down as a result, due to less competition.

“None of them want to buy Australian meat forward at present, so there’s either supply building up in cold storage, or traders are trying to keep meat moving, and accept a lower price.”

“Either way, there is a fair bit of price pressure on the domestic market at present. That’s especially so on the more expensive cuts like scotch fillet, eye fillet, porterhouse.”

“But it’s anybody’s guess as to how much of that is being driven by changing consumer sentiment under fuel price pressure, and how much is simply supply related,” the wholesale trade source said

“There’s also a few signs of panic buying within the big domestic supermarket chains, caused not by beef access, but by access to plastics and packaging materials. Most of that is around mince, rather than muscle meat.”

Early evidence in sales

Sydney retailer Sutcliffe Meats, which operates five busy shopping centre butcher shops around Sydney and Newcastle, has already seen early evidence of changing customer buying patterns linked to fuel price.

“I wouldn’t say it’s fully mature, because Mr Trump’s war only started a month ago, but petrol pricing shock is definitely coming through,” Sutcliffe principal Stephen Kelly said.

“Consumers are definitely becoming more cautious. We haven’t seen people stop spending, but there’s been a migration either to ‘specials’ or cheaper cuts – but not necessarily cheaper proteins over beef – as the export markets slow down a little,” Mr Kelly said.

“We didn’t see much drop in wholesale prices during January-February, but we are seeing some substantial drop-off at the moment – particularly if it’s grainfed or Wagyu at the higher end. Those two categories seen to be impacted most – and I guess that may well be due to China.”

Grainfed Angus cube rolls that were hovering around $45/kg wholesale back in February were now closer to $38-$40/kg, he said.

Mr Kelly anticipates further declines in wholesale beef prices ahead. “The full impact on export processors has not really hit us yet. They would have all been absorbing some of the shocks, and from what we understand the US has been the saviour in being to soak-up virtually any red meat, which is no surprise.”

Easter trading lacking ‘strength’

The run up to the Easter long weekend is normally a strong trading period for beef retailers and wholesalers, but sales had been noticeably flatter this year, some traders said.

“But traditionally, the domestic market often falls off a cliff after Easter, as colder weather reduces demand for grilling cuts,” one trade contact said.

Big rates of national slaughter evident over the past four weeks was clearly aligned with exporters racing to fill China orders before the quota fills, he said.

“We’re seeing cost of living pressures, fuel price and availability pressures, the China tariff distortions, a rising Aussie dollar, and the likelihood of Australia hitting its South Korea Safeguard by around July, pushing tariffs back up to 24pc for the rest of the year.

Brazil will fill its own China quota at much the same time as Australia, suggesting greater competition for Australia in alternate markets like the US and Canada, Indonesia and the Middle East.

“There is just so much uncertainty over the next three or four months, and fuel price and high rates of slaughter are only adding to that,” the trade source said.

“In China, my customers are telling me once Australia and Brazil fill their 2026 quotas, the population will just shift across to more chicken and pork.”

Prices sharply lower

A large multi-state domestic wholesaler told Beef Central yesterday wholesale prices on some cuts had fallen $2-$5/kg and more, in a matter of weeks.

Good wholesale MSA rumps (smaller weights, suitable for retail use) this week were making about $15/kg in the Sydney wholesale market, down from $16.50-$17 two or three weeks ago.

Quality scotch fillets have been hard-hit – one of the cuts diverted out of the export trade in volume by southern packers. Prices this week for good quality grainfed descriptions were $32-$34/kg wholesale this week, down $10/kg on prices seen just four weeks ago. Good yearling grassfed scotch fillets are now back to $27-$28/kg, also back $10 since late February.

Reports have circulated about quantities of ‘old meat’ in domestic cold storage as stocks build – in one case 8-13 weeks since pack date – which puts added pressure on marketers to sell.

“The run-up to Easter has definately been slower this year for domestic wholesalers,” another wholesale contact said, “and inevitably the wholesale market struggles for a period after Easter.”

“It felt like a drop like COVID,” he said, “but it’s stopped falling now. Part of that may be the Easter high demand effect, and some regional independent butchers may in fact be concerned about delivery access next week, if trucks stop running due to fuel access.”

The wholesaler said there was a presumption that the Middle East issue would push more meat back onto the Australian domestic market, and that, on top of reduced access into China, Indonesia, the Middle East (for higher quality sweet cuts) and South Korea would land a lot more meat into the domestic channel.

He said there were some suggestions around that some nervous consumers may be starting to stockpile frozen meat again – just as they did during the COVID period.

“There are supermarkets in more remote regional areas that are struggling this week to keep product on shelves – because of fuel access reasons,” he said.

“That won’t necessarily affect the wholesale trade directly, but some consumers might be looking to freeze down some supplies – just in case.”

“But overall, the domestic wholesale market is very unstable – I have not seen it in this shape since the COVID era.”

Fuel ‘surcharges’ on wholesale deliveries

Another fuel-related development in the past week has been the application of ‘fuel surcharges’ by some red meat processors on meat sales to wholesalers. Traditionally, prices quoted to meat wholesalers by packers have been on a delivered (landed) basis, into the wholesale customers’ coldrooms.

That’s now changing, with at least some processors abandoning the ‘landed’ price to include an extra fuel/freight surcharge, Beef Central was told. That fee – never seen before – varies depending on the source, but some were charging 40-50c/kg carton weight.

Words like ‘gouging’ have already been mentioned, with some saying the surcharge greatly exceeds the actual delivery cost (perhaps 8-10c/kg more).

“It’s rapidly evolving into a COVID-type market conditions with supply and demand – without the important cash floating around from government hand-outs during the COVID era,” one trader said.

He suggested that some people who did not want to “spend the extra $500 on diesel on a caravan holiday’ over Easter this year might now stay at home, and perhaps treat themselves to a nice big rib-roast on the Webber, or family BBQ.

“People will continue to pay ever-higher petrol prices that are coming through, but may cut back on entertainment spending – much as we saw during COVID – but in this case there is no government money being dished out to support them,” he said.

Elsewhere, Australia had lost a large chunk of its former Middle East beef market since the Strait of Hormuz closed  – a high-end grained marbled beef market – pushing even more beef into other directions.

“Where does all that product go? If it comes back onto the domestic market, it will be at a price – it won’t be at previous export sale values, because the domestic market simply won’t absorb those numbers,” the trader said.

In other parts of the world, Brazil is facing a similar dilemma as Australia, likely to fill its China quota some time around mid-year, pushing more Brazilian beef that previously would have gone into Shanghai or Beijing into other export markets during the back half of the year.

While that beef (at this stage at least) cannot enter Japan or South Korea, it is likely to compete directly with Australian product in markets like the US, Indonesia, and the EU.

“Will US customers taken on a much greater volume of Brazilian meat? Probably not, as many US food service and retail customers and channels apply strict policies about sourcing imported product, so there is a limit to how much Brazilian meat will head into the US, in the absence of trade into China,” the trader

“There’s a lot of uncertainty out there, and that impacts meat price.”

Reports early this week suggested New Zealand lean trimmings heading into the US market have seen price drops of US10c/lb (equivalent of A32c/kg) since Thursday, in part influenced by fuel prices and disposable income pressure in the US.

“Traders have some cover, based on good prices attached to earlier orders, but they can’t repeat it with new business,” one export trade contact said.