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Meat wholesalers’ chillers look threadbare, in face of beef supply chain challenges

Jon Condon, 19/01/2022

Wholesale meat prices have risen dramatically in the early stages of 2022, as the big supply-side shortage caused by COVID sickness among meatworkers (click here to view yesterday’s report) and transport operators echoes on through the meat supply chain.

In discussions with Beef Central this morning, one large wholesaler operating in multiple Australian states suggested his coldrooms had never looked more empty than what they are at present.

Phones had been running hot last week, as new and existing customers chased supplies after normal channels were closed. This week, those calls have dried up somewhat, one wholesaler said.

The fact that the current COVID challenges in meat plants had hit so soon after the annual seasonal Christmas/New Year processing plant closures has only exacerbated the domestic meat supply situation, one contact said.

The domestic retail and food service markets typically account for 30-35pc of Australia’s overall beef production – the industry’s single largest customer.

All proteins impacted

The current impact was being seen not only for beef, but right across the animal protein spectrum, including chicken, pork and lamb.

One contact said lamb (processed mostly in southern regions of Australia) was in particularly tight supply, in line with yesterday’s report suggesting southern meat processors were perhaps further along the ‘infection curve’ than processors further north.

Reports circulated this week about major meat chicken processors having to euthanase large numbers of birds last week, for lack of staff to process them.

“Chicken is in the worst position of the lot. It is a disaster, and it’s pushing even more pressure back on beef and other options,” one wholesaler said today.

Added to that, personnel working in distribution centres, and refrigerated transport operators are also being impacted by current staffing challenges due to sickness. Some large national retail supermarket sites have been receiving meat deliveries only every two or three days, rather than daily.  Much the same as the panic buying episode witnessed last year, that’s led to gaping holes in some supermarket chilled cabinets since earlier in January.

Price rises evident

“All wholesalers are very short for supply, and cleaning up their positions rapidly,” one prominent wholesale market contact told Beef Central this morning.

“There is some silly money being asked for meat at present, but those rates look very artificial at this stage. It’s just supply and demand in action.”

While all cuts and trim are being impacted, asking prices for good quality cube rolls currently are anywhere from $40 to $45/kg at wholesale level, but traded volumes at that price are very patchy, often representing ‘desperate’ deals, the trader said. Pre-Christmas, those same cube rolls were making mid 30s.

Lean beef trim used for grinding beef has also risen sharply in price this year, with asking prices reported anywhere from $9 to an unprecedented $12/kg for 85CL, depending on who was ‘desperate enough’ to buy it. That’s up a couple of dollars on last year.

“People are asking, is there price gouging going on? I don’t think so – it’s just that supply is currently just so far short of demand, and prices are responding accordingly. These are highly unusual times,” the wholesaler said.

“And don’t forget, beef being sold at wholesale and retail level this week was from cattle procured at the back end of 2021, when slaughter and feeder cattle prices were the highest in history. That, alone, accounts for some of the current prices being seen.”

“Also, due to the uncertainty, customers don’t know what it is going to cost to replace current supplies, so there is probably a bit of ‘danger money’ attached to current pricing.”

Both Woolworths and Coles online shopping portals had large numbers of beef items listed this morning as ‘out of stock,’ ‘temporarily unavailable’ or ‘available in-store only.’ Woolworths prices were no longer displayed, but Coles had scotch fillet at the equivalent of $43/kg and four-star mince at $16.25/kg. Some supermarket beef items lifted in price pre-Christmas, in direct response to soaring cattle prices during November/December.

“But we’d expect processing plants to start to rumble again in a few weeks’ time as staff return to work, and volume will again start to recover,” one wholesaler said. “I’d say supply will remain very tight through to mid-February, and then start to improve.”

“But one issue is filling the hole – getting a reserve of meat back in the coldroom – because of a lot of trade this week is being done hand-to-mouth. Some of the meat arriving in our coldrooms this week is gone again three hours later.”

Another emerging factor, one wholesaler suggested, was that the eastern states beef kill for the next month (for reasons explained in yesterday’s article) would be ‘pretty much entirely grainfed’, limiting options for wholesalers and exporters, and delivering longer shortages of manufacturing and budget type beef.

Because of the service kill contracts involved, large national supermarkets are being given priority in processors kill space at present, one wholesaler suggested, with spot market business dropped down the list.

“It will be interesting to see how this situation plays out over the next couple of months, because in truth, nobody really knows,” he said.

Independents adapting to conditions better

Multiple trade sources spoken to for this report suggested independent butchers were riding-out the current conditions better than the major retail supermarkets.

“They are not dealing in the same quantities of meat, and are more nimble in securing alternate supplies, if their regular source runs out,” one wholesaler said.

Many independent butchers are evidently still offering a full range of fresh meat staples.

As a result, some are reporting takings well up, for this time of year. One large Brisbane independent reported takings up from $37,000 to $57,000 in a week, as a result of the supply issues among other retailers – because he had access to meat. Another Brisbane butcher said his online home-delivery sales had quadrupled in the past month.

“People don’t want to go to big shopping centres, or check in as a casual contact. They can order meat from us, and get it delivered two days later in an insulated box to the door – the same meat as in the display tray in the shop,” he said.

Brisbane butcher Michael James, Queensland state president of the retail division of the Australian Meat Industry Council, said butchers had responded strongly to current conditions.

“Members I have spoken to are telling me their windows have remained reasonably full. They seem to be coping better than the larger, more complex national supply chains,” he said.

“If a butcher sells out of an item in Tuesday, he can ring around and find a source, and have it back in stock 10am Wednesday,” Mr James said.

Some butchers had had to work a little harder to source supply, but many had tried to build a few days extra stock levels to avoid supply chain hiccups in transport and other areas.

Significantly, Mr James said some butchers had reported connecting with new customers, including younger ones, who had only previously ever shopped in supermarkets.

“They were amazed at what goes on in an independent butchery.”

Mr James said with Australia Day looming next Wednesday, he anticipated a big surge in customer traffic through independent butchers’ outlets over the weekend and up to Tuesday to source their lamb, knowing that butchers were better stocked than the major chains.

Staffing continued to be a big issue for butchers, with staff either sick with COVID, isolating as close contacts, or simply hard to find in the job market.

 

 

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  1. Val Dyer, 19/01/2022

    Please do not blame producers for the price rise. They can supply all the meat that Australians want to buy.

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