Opinion

Opinion: Australian Beef Association questions red meat report findings

David Byard, Australian Beef Association, 29/10/2017

I read with interest in Beef Central on October 18 a story quoting RMAC report on the state of the Australian Red Meat Industry compiled by EY.

After much research I can’t make my figures balance with those in the report, and would be grateful to be told whether I am right or wrong in suggesting that some of the figures in the report may not be correct.

Australia is a leading supplier of red meat in the world and Australians eat more red than anybody else, according to the RMAC report.

According to the beef2live website Uruguay ate 56 kg per capita per annum carcass weight, Argentina 54kg, Brazil 36kg and the US 35kg, and Australia went through 29kg. However ABARES suggests that in fact the figure below 25kg. At the same time Australians ate through 10.6 kilograms of lamb and mutton.

To me this suggest that Australia ate through a total of 36 kg of red meat, nowhere near what some other countries like Uruguay and Argentina beat in beef alone.

The report also claimed in 2016 Australia was the biggest exporter of beef.

Again according to my research in 2016 Brazil exported most beef closely followed by India which include Buffalo meat and Australia comes in third.

The RMAC report goes on to tell us that cattle prices have risen by 125pc and the retail price has gone up by 75pc.

ABARES figures suggest that cattle prices in 1996 at 2016 average $3.24 over that time span.

However, we saw an incredible spike starting in early 2015 where prices went up to over $6/kg.

It seems to me that two or three seasons over 20 years is not a good indicator of price and using selected data can sometimes be very misleading. Retail price of beef in Australia suggests that we were paying about $10 a kilogram in 1996 and now we are paying something like $19 a kilogram, this is certainly more than 75pc increase.

RMAC chair Don McKay says we’ve seen recent examples of the Australian red meat industry being damaged by attacks by crusading politicians. He goes on to say the report should be used to acknowledge the way industry brings us together. However economic reality means that producers want as much as possible for their cattle and processors want to pay as little as possible.

What is the reality? There is increasing recognition that we all should not see people along the supply chain as our enemies. However in 2013 in the grip of drought processors showed no mercy when producers were forced to give their cattle away and processors made a killing. More recently the situation has reversed. Somehow we must try to come together and ensure the long-term viability of everybody in the supply chain or at least understand each other’s situation.

Supply chain cohesion at the least should be a genuine aspiration to focus on even if it takes time to get there. It is the responsibility of the industry organisation to work towards a more cohesive environment. In that direction we need to ensure all grass fed producers have a representative organisation which works on their behalf effectively. This is what producers have recognised. Industry leadership should get on board and support this identified need.

Recently I read an article, where MLA boss Richard Norton compared the crisis facing the red meat processing sector with the very troubled Murray Goulburn.

Whilst many of our international competitors in the export beef industry are experiencing  low beef prices we in Australia are out of sync. Worse we have high farm gate prices. Perhaps Mr Norton is suggesting that either price producers are receiving is too much or processing costs are too high. He goes on to talk about the amount of beef coming out of the US and talks about overseas countries switching to American beef because it is cheaper.

Surely the point is that the beef industry is like agricultural industries they move in cycles. Sometimes producers are in good shape with high prices and sometimes the processors are the winners, there are a lot of factors contributing towards the volatility. This happens with our competitors as well and Australia exporting increasing amount of beef and leaves us exposed.

In some cases the simple fact is we are getting clobbered on export markets by cheap imports from countries that have no trace back system and QA systems that we are constantly told we need. Like everything biosecurity has a place, however we can over do it.

When our customers are willing to purchase cheap beef from competitors who do not have the same level of integrity we have a problem.

Recent reports suggest that producers are getting about 47pc of the retail dollar on beef, very simple to say, however there are numerous factors, not the least being the price producer receives and the price of meat over-the-counter.

In recent years ABA developed a spreadsheet that took all the costs, including processing, purchase of carcass beef. After all the costs and the price of retail meat one can get a pretty accurate guide producers share of the retail dollar.

It was interesting to note where the ACCC road tested this spreadsheet and its only comment was it didn’t know what the supermarket costs were. It seems that the point was missed, we were only trying to establish what the share of the retail dollar was. In 2013 at the height of the drought producers share would have been about 28pc of the retail dollar and when the prices went over six dollars producers share of the retail dollar would have gone up to 50pc, with prices coming off the boil could be 40pc.

Talking about market performance in cattle prices,  the MLA came out at the AGM 2016 and talking about producers getting $88 a head MSA premium which reportedly equated to nearly $200 million.

Now in 2017 we are told there has been increase of 2pc in cattle being graded MSA. However, the premium seems to have gone back to $65 dollars a head or a total of $130 million in premiums?

I would be very interested to see how these things are estimated.

What I can say we need greater access to the way MLA  data is compiled and at the same time we need to get control of levies and let MLA get on with being a service delivery company which is the role under the MOU.

Is it possible that the crusading politicians also recommended this direction?

 

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Comments

  1. bill nicholas, 31/10/2017

    as a foundation member of the cattlemens union who tried to fix the problems you are talking about here,we failed and we are still waiting for the next drought or export price downturn.
    after watching these things happen in all export commodities over the last 40 years,what we need is multi peril insurance for all farmers
    this could be made to work using some of the money govt spend on drought relief etc

  2. Brad Bellinger, 28/10/2017

    Good article David .You are bringing RMAC into account and saying it like it is. Of course if Barnaby was true to his word RMAC would not exist.

  3. John Gunthorpe, 28/10/2017

    I agree with you David. When completing business plans for AMH in the 1980s one of the figures that stuck in my memory was Argentine consumption at 169lbs per capita or 76kgs. They love their beef.

    Australia will never reach these heights and unfortunately beef consumption has been falling for more than a decade replaced by chicken. If the report suggests Australia is the leading red meat consumer worldwide then they are definitely incorrect.

    Regarding MSA premiums, processors work the tactic of buying on the average and selling on the special. They pay one premium for MSA (yes or no) to their suppliers of cattle and then grade to the star rating to sell as a premium MSA brand or standard MSA brand to the consumer. This is not new.

    If your figures are correct there seems to be a reduction in the number of animals graded MSA. However, processors are being squeezed at the moment for margin and may have reduced their MSA premiums or more strictly applied company specifications to reduce the payments.

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