Fundamentals strong for grainfed beef

Jon Condon, 08/04/2011

While lotfeeders are experiencing the challenges of high grain and feeder cattle prices mixed with a resilient A$, MLA’s recent Marketing Taskforce meetings provided some encouraging context regarding future fundamentals, according to ALFA President Jim Cudmore.

Declines in beef herds in the US, the EU, Russia and South America mixed with growing beef demand from the emerging markets of South East Asia, China, Russia and the Middle East offered significant potential for the grainfed sector, Mr Cudmore said.

“Naturally, these opportunities are entwined with considerable regulatory, trade and commercial challenges, but they nonetheless provide cause for optimism,” he said.

Total Australian grainfed beef exports climbed a further 3.5% in 2010 to 216,339 tonnes, an increase of 7.5% since the recent low-point of 201,238t in 2008.

“Although not outstanding, this trend is significant in the face of massive increases in competition from the US in our largest traditional grainfed markets of Japan and Korea. While the US has steadily increased market share in Korea since 2006, as a result of increasing per capita consumption, Australia’s beef exports to Korea were actually double those seen prior to the outbreak of BSE in the US,” Mr Cudmore said.

In 2007, almost 90% of Australia’s grainfed beef exports were sold into either Japan or Korea. As a result, the ability to grow demand for high quality Australian grainfed beef in other regions such as China, South-east Asia, Europe, Russia and the Middle East could not be under-estimated, he said.

“Australia’s unique high-standard production methods have enabled brand owners to gain real traction in export markets. Despite the challenges of aggressive US competition in our international markets and a volatile currency, Australia has been able to develop strong support for our grainfed beef based around integrity and safety.”

Mr Cudmore said Australia must not devalue the importance of systems that underpin this competitive edge around the world. “We must strive to ensure that we increase adoption of the systems available and improve the commercial value of these systems to industry.”
Australia was the industry’s most important beef market, and the domestic trade had been a significant driver of demand for grainfed cattle during the low points in export demand. In conjunction with MLA, ALFA continued to work towards ensuring that Australian consumers had increased knowledge, predictability and enjoyment from their beef selections.

“The importance of the grain feeding sector in the beef supply chain is entrenched in Australia. We need to be proactive in ensuring that we have the capacity and capabilities to meet not only the future demand for our cattle and beef, but that we provide appropriate credentials to our customers and consumers,” Mr Cudmore said.

“As producers we are bombarded with feedback about the consumer’s desire for increased information about our food production systems. With consumers’ increasing knowledge and affluence, food safety is now taken as a given at retail,” he said.
“We are led to believe that a more savvy consumer is now focusing on the environment and ethical livestock management in their purchasing decisions. But is it that brand names are now ‘king’ in retail, meaning that brand owners must continually provide a point of difference to create preference for their particular brand over others?”

“To differentiate the brand, and engage the consumer with a ‘story’ about the product range, brand owners have increasingly raised the bar on production techniques and methods. With food produced from livestock, this opens the door for all sorts of different claims being raised to entice the consumer to a brand owner’s specific offering,” Mr Cudmore said.
“Whatever or whoever is driving the consumer, one thing is for certain – the grainfed cattle industry must ensure that the beef consumer understands our production systems and the genuine integrity associated with grainfed beef.”

The National Feedlot Accreditation Scheme was one important vehicle that provided true credibility and affirmation of the industry’s production methods.
“A system audited by an independent authority, in AusMeat, provides assurance not only to regulators, but also to consumers that our industry has the systems in place to manage the prevalent issues,” he said.
“The importance of having third-party auditing of our standards in livestock management, feed preparation and delivery, biosecurity and the environment is critical to our future. People want to be convinced that we are responsible managers of our water and land assets, that we care for our cattle under the most extreme conditions, and we have the capacity to train and develop our people to provide opportunities for the future."
“A new wave of accountability in food production is upon us and we must rise to the challenge. We must also convince the consumer that increased accountability comes at a cost, and a desire by a minority of consumers for some ‘utopian’ food production methods will only increase the cost of food over time,” Mr Cudmore said.


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