An average cattle price of $3 per kilogram liveweight is needed to maintain the viability of grassfed cattle production in Australia, Northern Territory Cattleman’s Association president David Warriner told last Friday’s annual conference.
Mr Warriner said a $3/kg lw average was the price needed for producers to cover their operating costs, to provide a competitive return for investors, to provide adequate funding for marketing and productivity R&D, and to maintain and improve the industry’s ‘social license’ to operate.
This effectively meant that the production sector had to minimise waste wherever possible, fight hard against new costs and to freeze or reduce adverse regulations, and to find and nurture market segments that can deliver premium prices.
A common message from several global market experts who addressed last Friday’s conference was that Australia’s future in Asia will rely on 'value over volume'.
Aust should become 'the delicatessen of Asia'
For example, Asia-Australia trade expert Dr Caroline Hong said Australia’s beef industry should not aim to become the food bowl of Asia, but rather the ‘delicatessen’ of Asia.
Australia could not compete globally on low prices to feed the billions in Asia, but rather should focus on supplying the millions of premium consumers in Asia.
“Our Australian beef, that is where we can stay competitive… it is about our quality, safety and our food is tasty, that is what we compete on,” she said.
“And that I believe will be the solution for the cattle and beef industry in Australia.”
$3/kg can be found in Asia's growing middle class
Earlier in his opening address Mr Warriner had delivered a similar message, warning that Australia had to differentiate and play to its strengths in future.
“We cannot go head to head with those countries with lower cost bases any more," he said.
“The middle class of Asia is developing at an astounding rate. It is said there will be six times the number of (middle class consumers in Asia) in 20 years as that of today.
“Within this demographic is the $3/kg market.
“We can provide clean, green, high quality, certified, socially licensed products that they demand.”
Mr Warriner said the current industry restructure process also had to address the fact that producers on one side and beef and cattle exporters on the other had diametrically opposed aims at the point of livestock pricing.
For exporters, the cost of livestock was by far their largest cost, and one they constantly sought to minimise.
Mr Warriner said that in his view, the expenditure of the $3.66/head marketing component of the $5/head cattle transaction levy should consider the costs and margins of the whole supply chain, including the cost of production for producers, and be spent only in markets where consumers can afford to pay what Australian producers need to remain profitable.
“The question I ponder for hours over in the middle of the night is; Why should grass fed levies be spent on markets that cannot afford our beef or cattle in the first place?,” he said.
“I would suggest identify those countries, regions, segments of markets that have economies that can afford it and spend the money there. Let the exporters pay the cost of diversifying into B grade markets I would say.”
But nor was Mr Warriner ‘bashing’ processors.
As someone who has worked in the processing sector himself, he said it was clear that most producers did not understand the processing and exporting business.
“I have worked in the processing game and when I hear producers calling for processors to share profits more equitably I shudder,” he said.
“The losses these guys make in good seasons are bloody terrifying sometimes and I know producers would not be sharing their profits, no matter how high they were.
“Better understanding would certainly save a hell of a lot of time and energy wasted on debating and rectifying this issue.”
Groups with conflicting agendas 'risk annihilation'
On the issue of national industry restructure, Mr Warriner told the conference that some representative bodies risked annihilation because they had too many conflicting agendas, did not represent one constituency and could not fight one fight well.
The industry had clearly stated that it was not satisfied with the performance of peak bodies or with the selection committee process for electing directors to the MLA board, and that it wanted non-State Farm Organisation and individual representation on Cattle Council of Australia.
“Frankly, I don’t think anybody can say industry is wrong. And I don’t think these are difficult things to achieve,” he said.
“The complexity of the existing structures and arrangements, the complexity of tax law around compulsory levy collection, and the complexity in ensuring an adequate funding stream to a redesigned and fully independent CCA that clearly directs MLA where our $3.66 and 92 cents are to be spent, are all difficult and complex aspects to deal with, but it has to be done.”
He said he believed that grassfed producers must have 100pc control over their part of the levy, and CCA must have 100pc control over the part of MLA that is providing that service, and MLA could not allow that service to be compromised by other influencers in any way, shape, or form.
“Transparency then comes to mind,” Mr Warriner said. “There should and can be no reason why MLA cannot prove that any part of the grassfed levy was not spent as instructed.”
On Beef Central's daily news email tomorrow: 10 take home messages from NTCA 2014