AUTOMATED carcase scanners using x-ray and 3D cameras could start replacing humans in determining how carcases are graded and priced in Australian meatworks from next year.
The introduction of objective measurement in the carcase grading process is being embraced as a way to provide greater independence and improve levels of trust between producers and processors.
The move also paves the way for the introduction of ‘value based marketing’, where producers are paid more for producing cattle that meet specific customer requirements and less for cattle that do not.
Using objective measurement to provide more accurate feedback to producers, and price signals that reward and encourage the production of higher eating quality beef, is seen as critical to the strategic direction of Australia’s beef industry.
Australia relies heavily on export markets but cannot compete on price against other beef production nations that have much lower costs of production. Competing on unmatched quality to command premium markets and premium prices is where the industry is focusing.
That requires producers and processors to work together in a way that has not often happened in the past, and to find ways to share risk and reward.
Current price signals, based on dentition and carcase weight, do not reward production of quality beef.
Years of frustration at seeing cattle consigned as MSA, but paid on dentition, leading to lower prices for carcases with better eating quality, and boning group one equivalent product ending up in manufacturing cartons, has fuelled the recent push by Cattle Council of Australia for changes to Australian beef language.
At the same time, objective measurement technology, sourced from around the world by MLA and AMPC in recent years and adapted to meat processing, is also now showing serious signs of being able to support industry-wide adoption of value-based marketing.
Dual X-ray (DEXA) and hyper spectral imaging cameras have proven they can effectively to assess up to 10,000 carcases a day in southern lamb meatworks, Meat & livestock Australia managing director Richard Norton told last week’s producer forums in Queensland.
He said the same technology could start appearing in beef plants as early as next year.
That timeframe seems optimistic, given the number of questions that still need to be resolved before that happens. i.e.:
- Will the same technology work on beef carcases at viable speeds and with acceptable accuracy?
- Who will manage, calibrate and interpret the data produced?
- At a cost of millions of dollars per plant, who will pay for the technology?
- Will national rules be developed to ensure all plants use uniform technology, so producers can compare apples with apples (or in this case carcases with carcases)?
- And if so, which technology will it be, and who will decide that?
Despite the many loose ends, industry leaders see much to be gained from the introduction of objective carcase measurement and value based marketing, and appear to be enthusiastically committed to its introduction.
In lamb plants where the technology has been trialed so far, the technology has been used to produce a 3D image of each carcase, which then informs robotic saws exactly where to cut each carcase.
The same robotic-technology is also being trialed in some beef plants but the larger size and inconsistency of beef carcases means commercial uptake of robotic processing in beef may still be some time away – see JBS’ comments to Beef Central in July.
Images allow grading decisions to be checked
But robotics aside, one of the main benefits of the 3D images captured on every carcase is that the images can be recalled at any time.
This means carcase-grading decisions can be rechecked after the event, should a producer question a result when they receive carcase feedback.
At present, the ‘evidence’ needed to check a grading result is boxed and already delivered to a customer, perhaps overseas, by the time a producer may receive feedback and wants to challenge a grading decision.
“If there is a dispute we can call back up that carcase and go back over the data,” Mr Norton said.
“The data can’t lie, there is no human intervention.”
Evening out the peaks and troughs
Industry leaders want to find a way to level out the dramatic peaks and troughs and boom-bust cycle for each sector.
Cattle Council of Australia director David Hill cited the case of a producer from Blackall who sold 400 cows in 2013 for $236 per head.
Assuming the same producer now has enough feed to restock, he would have to pay over $1000 a head to buy back similar cows.
“For what he received for the 400 head he sold then, he could now buy back only 100,” he said.
“We have to get away from this.”
He believes the production and processing sectors working together to maximise returns across the whole supply chain can achieve this.
Traditionally the industry has worked on a ‘high-throughput minimal-margin’ business model, which has led to industry-wide returns on investment far below what other business sectors would consider sustainable.
Data underpins quality focus
The CQ cattle producer says that with our high costs of production, it makes no sense for Australia to try to compete on price in export markets with countries like Brazil and India.
“With the provenance of Australian beef, we have globally recognised brands that get a premium, because of the quality and consistency,” he said.
“We need to open more markets where consumers have a willingness and a capacity to pay for our product, so we can then sustain our cost of production and keep the whole supply chain profitable.”
The two benchmarks currently used to determine cattle returns in Australia – dentition and carcase weight – were “basically of no interest to the consumer at all,” Mr Hill said.
“You want the price signals that are going to help you decisions on-farm from the whole supply chain back.
“Everything has a value, whether it is high-end MSA or manufacturing beef.
“Value-based-marketing gives price signals back from the rest of the supply chain, so we can then make a decision on what we can do, which is then also going to be of more value to the whole supply chain.”
Nationals Senator Barry O’Sullivan said producers could spend roughly the same amount of money producing an ordinary article as a good article, yet the difference in returns was hundreds of dollars per head.
“You can either send them out and get $800 or $1100 and nothing will change back on farm, other than the bulls and the females and how you manage them,” he said.
Should producers and processors ‘share’ returns?
An idea floated during last week’s forums draws on a century-old marketing in the sugar industry.
When sugar growers sell cane to a mill, they retain a partial economic interest in the commercial sale of the sugar when it is sold as processed, graded product.
If the sugar sells well, the grower does better, if the sugar does not sell well, they do worse.
The sugar marketing principles of “grower and miller economic interest” are based on the idea that growers and millers share in the “risk and rewards” of the supply chain.
Under this arrangement, each party is reliant on the other doing a good job to attract a price premium.
The Senator’s view is that both producers and processors could use the new objective data, once available, to pull their weight in working to deliver a quality product so an export price premium can be consistently achieved.
Producers would also have to become better informed about how to use data to improve production.
At a meeting with producers in Quilpie, Senator O’Sullivan asked if cattle producers would be willing to enter into a similar arrangement with a processor, where they received less up front but backed themselves to have the right article in terms of specs and quality, to achieve a premium at the other end.
And would they be satisfied with getting a more constant return at which they could make a profit, but without the desperately low prices of recent years, or the very high prices now on offer?
“I’d be a lot better off over the last 20 years,” one producer in the audience responded.
More trustworthy relationships needed
Senator O’Sullivan said that as he travelled around he received many complaints from producers about processors, but noted that it was not all one-way traffic.
Processors also had issues with producers, such as when producers booked cattle in and a few days before delivery pulled out of the arrangement because they had received some rain and had decided to hold the cattle for longer.
“That processor will take a hit on the chin as a result of that. And if that happens three or four times they are in all sort of trouble,” Senator O’Sullivan said.
“This is where I believe the answer rests,” he said.
“It is to get a better, more trustworthy and developed arrangement between a producer and a processor.
“If you can preserve some economic interest beyond the farm gate as this article goes through, if you have done a good job, and if the processor gets excited because he has a has a customer at the other end, then you will do better.
“But if you don’t care and your cattle aren’t in condition and your breed plan is poor and you are going to just send them in anyway, and when it comes in it doesn’t meet any of the specs of his client base, then you will do worse.”
Producers cooperating to build scale?
Scale is another point of difference. The Senator said he has noticed that producers with larger scale – 5000 or 10,000 cattle or more – generally say they have positive relationships with processors.
“They have a relationship with the same processor you have a relationship with, they’re happy.
“So we have to ask ourselves why that is the case?
“I suspect they do better on average for the articles they produce and put into that processor than you and I do going through the saleyards, because they have become an important client of that processor.
“They are producing the exact article they are looking for that he is attracted to because he has a place to sell it, where he is going to make a profit and you’re going to make a profit.”
This did not mean producers had to get bigger, but suggested there was merit in considering mutualising of cattle operations and bonding together.
“If you are a cow calf operator out here you are the most exposed red meat producer in the world, because everything has to go right for everything to go right here.
“So somehow the sector has to get beyond the farm gate.
“You might have arrangements with five or six other producers, and there are many successful stories about this happening
“The US has gone this way, in a big way
“US producers have bonded up, six or seven where they take their cattle past their gate – they background them, feedlot them in some cases they brand them and move them on.”
Single log-in for NLIS, MSA, LPA
As better objective measurement comes in, MLA is also making it easier for producers to access that information on their cattle.
Mr Norton said soon cattle producers will be able to have a single sign-on point for NLIS, MSA and LPA.
“When we start adding functionality to that database, you might go on to look at a market report or research grassfed cattle, then it pops up with cattle you sold 300 days ago, with their performance once they came out of a processing plant on objective carcase measurement.
“This is where we are aiming to go, so even if you sold it to a saleyard or to a feedlot, then you can benchmark and have conversations with your seedstock producer, you will know what article you are producing.”
“Whereas today you close the door on the back of the truck and that is where it is.”
Further comment on yield based marketing.
It is my contention this is in place now as the grid.
Many years ago researcher Robin Shorthose et al produced an algorithm linking carcass weight, fat depth at P8 and age to predict yield of product. Today, over or under fat and weight attracts penalties as the grids express.
If my understanding is incorrect, I would appreciate clarification.
Meantime we cannot escape the fact that todays prices are about supply of cattle, not yield, not product value, just pure and simple supply.
Unless something alters, when supply and demand again are equal, processors will revert to the old system.
Producers will again get the dirty end of the stick.
Yield based, value based etc is just more of the same. A fundamental issue is that there is no mechanism or process to ensure extra value for product goes to producers.
In the last years we have seen our product reach record values in the USA yet returns to producers at the time remained miserable. Where was the processors ‘good will’ ? Where is the mechanism to ensure this reward goes to the person who delivered the cow?
Livestock prices only reflect supply of cattle to the processor with a bit of carcass specification and grading thrown in.
Any system based on yield or “value” will produce exactly the same result we have now. How are we going to ensure the benefits flow to the producer who generated them???
Without a transparent pass back system to reward the producer we are again at the whim of processors and we have long experience of their largess toward we producers.
Extra value is always syphoned off by others in the chain and producers receive the dribble left.
Ensuring the rewards flow to those who earn them is the only game in town.
We can window dress all we like but this is the fundamental base producers require.
I hope that the new grading system includes Yield Based Payment as well as Quality Based Payment otherwise we have achieved very little in the last 20 years. MLA has been pontificating about improving the genetic gain in cattle yet we are still to be paid for the gains we have made to date, so where is the incentive. Our seed-stock business has made significant gains in many areas and while our clients appreciate this they don’t see the rewards for their investment in these areas. So enough of the bullshit, let’s get serious about rewarding producers for carcase yield and quality and then the incentive to improve genetic gain will deliver results. I have had enough of those who don’t own even one cow continue to tell us how and what we should be doing to deliver what the market wants. When you depend on a cow to make a living and not just slurping at the trough where the cow drinks then you can talk about how we go about achieving improvements for all of the industry to prosper.