THE beef producer share of the retail dollar for domestic beef has exceeded 50 percent for the first time since record-keeping started in 1998, latest Meat & Livestock Australia data shows.
Producer share of the retail dollar averaged 51.25pc in the September quarter, as the surge in cattle prices has heavily outpaced any price increase at the domestic retail level.
As the table published below shows, the producer share has surged a dramatic 67pc since early 2014, when the figure was just 30.63pc. (Click here to access a larger version).
Over the same two-year period, retail beef prices have increased from $15.49/kg retail weight, to $19.34/kg – a rise of 25pc.
Placing pressure on retail beef has been the record breaking run of cattle prices throughout 2016 – albeit they have eased off since the end of the September quarter. Through saleyards across the country, the national trade steer indicator averaged 681¢/kg carcase weight in the September quarter, up 16pc year-on-year.
It should be noted that while over-the-hook prices did lift over this same period, they did not reach the same peaks as saleyard cattle, which attracted additional support from restocker demand.
After taking a breather in the June quarter, retail beef prices edged higher in the three months ending September, partly due to pressure from record breaking cattle prices.
Cheaper pork, chicken
Calculated using ABS Consumer Price Index data, indicative retail beef prices averaged $19.34/kg retail weight in the September quarter – up 19c/kg on the previous quarter and $1.58/kg above this time last year.
Cheaper pork and chicken prices ($11.86/kg, and $5.30/kg respectively) continue to place competitive pressure on red meat, MLA said in a report issued this afternoon.
So far this year, indicative retail beef and lamb prices have averaged a multiple of 3.6 and 2.7 times the prices of chicken, respectively – above the pre-2016 ten-year average of multiples of 3.0 and 2.4.
How is the producer share of retail calculated?
The beef producer share of the retail dollar is calculated using a range of assumptions. The national saleyard trade steer indicator is used as the benchmark for livestock prices, representing animals suited for the domestic market. Livestock prices are collected by MLA. Converting the carcase weight price to an estimated retail weight equivalent price is achieved using a retail meat yield for beef of 68.7pc.
The indicative retail meat prices are calculated by indexing forward from actual average prices of beef prices during December quarter 1973, based on meat subgroup indices of the Consumer Price Index, provided by the Australian Bureau of Statistics. These indices are based on average retail prices of selected cuts (weighted by expenditure) in state capitals. The retail price calculation has principally been made by ABARES; however, in some instances, the most recent calculation has been made by MLA.
The producer share is calculated by dividing the estimated retail weight equivalent livestock price by the indicative retail price.
About time the producer had a bigger share of the beef dollar, after all we hold the product for the longest time. I would like to see more focus though on increasing the size of the pie so all sectors could remain profitable, for too long one section or another of the supply chain most often the producer is operating with very little margin or at a loss. Long term this is not sustainable, one answer is to see more building of supply chain alliances between producers through processors to the final customer.
I cannot understand for the life of me why the beef industry continues to promote misleading statistics about beef and cattle prices. There are so many misleading assumptions in this calculation. Converting a sale yard price matrix into retail yield for a start, the sale yard prices also include young cattle that are not slaughter ready being purchased at a premium – we have a NLRS published over the hooks indicator – use it – the peak for an MSA Grainfed Steer from 260-280 kg DWT in the September quarter was $5.83 NOT $6.81. To then quote the beef price as being 3.6 times the price of chicken. I just did a quick tour of Coles online – I can buy chicken mince for $11/kg, pork mince for $13/kg and beef mince for $8/kg. I can buy pickled pork for $10.5/kg and corned beef silverside for $8.50/kg. Diced chicken is $16/kg and Gravy Beef is $8.80/kg. Chicken thighs are $16/kg and Beef Oyster Blade is $16/kg. Loins only represent 10% of a beef carcass – can’t believe that we are telling consumers BEEF IS EXPENSIVE when there are a world of value options on a beef carcass that we should be promoting.
Beef producers share of the retail dollar has exceeded 50% which is a record. These figures are at odds with the latest ACCC report that quotes Cole’s saying 2007 producer share of the retail dollar was 53%, my calculation suggested was more like 28%. Latest figures are based on the figure of $6.81 which comes from the EYCI which can be very misleading. Over the hooks prime steer indicator suggesting Queensland the top price MSA steer would get $5.95 and New South Wales the top would be $6.01 if my calculations are correct producers would be getting 44% of the retail dollar. Surely the time has come that we should be looking at the EYCI and how the information is gathered.
It is interesting to look at the comparisons between beef and lamb over the reporting period. It is a big deal when beef producers share of the retail price reaches 51.25%, yet a prime lamb producers share of the retail price never got below 52.54% over the same period. Those people that continually advocate increasing production as a means to reducing the volatility in beef prices should take note, what does the prime lamb producer have in their favour? ‘Supply never quite matches demand’, that may be a simplistic way to look at this, but often the simple things are relevant.
Interesting observation David. Part of the explanation could be the fabrication cost difference between beef and lamb – a lot more bone-in lamb products, from legs to loins and middle-meats, to keep cost down. Editor
Similar trend in the US two years ago as fed cattle prices reached record levels in November 2014. The “farmers’ share”, as calculated by USDA Economic Research Service, reached a high point that month and has since declined sharply as US cattle prices have fallen to the lowest levels since 2010. Retail beef prices always lag cattle prices and wholesale beef prices, both going up and coming down. US retail beef prices didn’t peak until May 2015 and have since been moving lower, but at a much slower pace than the cattle and wholesale beef markets. Retail beef feature prices have been falling faster than every-day prices, with many beef items showing larger store counts for beef features. This activity is encouraging in the face of record pork production and large poultry production.
Thanks for your comment, Dennis. Always good to hear from a respected US industry analyst like yourself. It will be interesting to see whether Australia follows suit. In Australia currently, it’s virtually impossible to find a beef ‘special’, or ‘feature’ as you call it, on supermarket shelves. Editor.