AN independent economic analysis of Australian red meat processing has found operating costs have continued to spiral higher over the past ten years.
Economic consultants Heilbron & Associates produced a seminal report for the Australian red meat industry ten years ago, exposing enormous cost to operate disadvantages in this country when compared with meat processing in Brazil and the United States.
The analysis estimated the weighted average operating costs to processors, excluding livestock and capital costs, based on a national survey of Australian red meat processors.
A new edition of the full analysis covering last financial year is due for release in coming months, however some preliminary local data (minus comparisons with US or Brazilian competitors) was made public this week.
The analysis shows that the cost to process a typical beef animal back in 2014-15 was about $360 a head. That has now ballooned to $530.80, representing a rise of more than 47 percent over ten years (see table).
Cattle processing costs 2014-15 Vs 2024-25
The Australian Meat Processor Corporation’s data and insights manager Seamus Hoban told a Brisbane processor gathering yesterday that the analysis clearly showed that operating costs had increased significantly over the last ten years – all well above rises seen in the Consumer Price Index (CPI).
Mr Hoban said the most significant cost increases occurred in transport, repairs and maintenance, and utilities. Livestock purchase was not included in the assessment.
“It’s a very challenging environment for red meat processors, as cost increases impact our competitiveness in the global market,” he said.
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Rises in fuel, packaging materials
Separate to the cost to operate analysis, AMPC has done some early analysis on the recent sharp rises in fuel and packaging materials prices on meat processing.
It found that for every 10c/litre that fuel prices rise above 2024-25 levels, it adds an additional $24.9 million in costs to the processing industry. Broken down into cost-per head, that equates to an additional $1.82/head for a beef animal, and 22c for sheep.
AMPC’s Seamus Hoban addressing yesterday’s AMPC technology showcase in Brisbane
AMPC is working with government and the Australian Meat Industry Council to get a clearer picture of how plastics and resin-based products are used across processing, including where they come from and the risks of supply disruptions. Early feedback from industry suggests that some processors without supply contracts have seen prices jump by around 30–35pc for certain plastics and packaging materials, including vacuum bags.
Also on the subject of costs, participants in yesterday’s Innovation Showcase in Brisbane saw a summary of the horrific and often duplicitous audit program requirements that red meat processors are subjected to.
Across mandates from state and federal governments, governments in customer countries, the World Trade Organisation, domestic and international customers and brand owners, Australian processors are subject to up to 66 separate audited programs each year.
“Many processors have staff who do nothing but manage audit requirements,” Mr Hoban said.
AMPC was currently working through audit harmonisation options with industry, customers and government, he said.
- Click here to view the original 2014-15 Heilbron report for the red meat industry released back in 2018, which described an ‘alarming lack of competitiveness’ in the local industry’s costs.
- Beef Central will circle back with a comprehensive report on the latest study covering beef and sheep processing and comparisons with conditions in the US and Brazil, when it is released.
A very worrying analysis indeed. Combine this with the cost of production rises in actually producing the product, that exceeds 47% in the last 10 years, makes you question how our product is viable to produce in a world market.