IN A clear recognition of the growing influence that China is having on the Australian beef export industry, Teys Australia has applied a 10c/kg carcase weight price distinction between HGP-treated and untreated cattle in its slaughter grid offers from today.
The HGP price distinction will apply on all grassfed cattle (excluding specialist brand programs) processed by Teys across its Queensland, NSW and South Australian plants.
The move clearly attempts to avoid any suggestion of ‘discounting,’ by ‘straddling’ the company’s existing grid offers. For example, the Teys Beenleigh grid offer yesterday for four-tooth heavy steer was 530c/kg. Today, it is 535c/kg for HGP-free steer, and 525c/kg on implanted steer.
The company decision represents a $33/head difference in price on a typical 330kg carcase weight four-tooth export grassfed steer sold to Teys, between treated and untreated cattle. Producers in Queensland, for example, where HGP use is highest, will have to weigh-up the weightgain productivity sacrifice in foregoing implants with Teys new price incentives.
As Beef Central has reported earlier, export trade into China – which accepts only HGP-free beef – has increased dramatically in size this year – last month rivalling Japan and the US in volume terms (see Beef Central’s earlier May beef exports report).
China has purchased an unprecedented volume of imported meat this year, with total pork, poultry, beef, sheepmeat and offal imports from all countries increasing 34pc for the year to April, compared with last year, to a record 467,000 tonnes.
Australian beef exports for the five months to the end of May went close to 96,000t, a huge 60pc increase on the same period last year.
Part of this import expansion has been underpinned by the spread of African Swine Fever (ASF) across China, as discussed widely by analyst Simon Quilty* in his series of earlier reports. As the China pork shortage becomes more acute in the second half of 2019, there’s further expectation that global meat movements will continue to pivot towards China, pushing greater pressure on Australian exports to source HGP-free supply.
The dramatic shift in demand from China, exacerbated by the ASF crisis, is the underlying reason for Teys’s move today to send additional price signals about its growing requirement for HGP-free beef.
Teys in fact removed its existing 10c/kg HGP price differential on grassfed slaughter cattle two or three years ago. It is no coincidence that that change corresponded with a decline in Australian beef trade into China at the time, which somewhat diluted the demand for HGP-free cattle.
Are HGP price distinctions common?
Beef Central has looked into the extent of market distinctions for HGP treated/untreated cattle in grass and grainfed direct consignment markets for this report.
Such grid price distinctions are not uncommon across grassfed slaughter animals, but are certainly not universally applied across the industry. Processor location has a lot to do with it, with the underlying low use of HGP in parts of southern Australia making HGP references on some southern grids irrelevant. So, to, does each processor’s different exposure to the China market.
Apart from specialised branded beef programs, JBS Australia, for example, has never applied an HGP grid price distinction on generic grassfed slaughter cattle across its Queensland, NSW or Victorian plants (HGPs are not allowed in Tasmania). But it can also be argued that JBS has a considerably lower focus on the China export market than some other processors.
NSW export processor Bindaree Beef applies no HGP penalty on grass cattle 0-4 teeth, but penalises 6-8 teeth cattle 20c/kg.
Apart from its HGP-free Manning Valley Naturally programs, Wingham Beef Exports in NSW applies a 20-25c/kg price differential on MSA treated/untreated steer under its Wingham Blue MSA program. No HGP distinction applies on generic grass export programs, but the company says it sees very few treated cattle these days, especially since the onset of drought.
Thomas Foods International applies a 10c/kg carcase weight penalty on all HGP-treated grass finished cattle.
Some processors also rely on their EU-accredited beef programs (HGP-free) for a supply of HGP-beef for other markets, without the need to single-out HGP use in generic grids. With just 10-15pc of cuts harvested from a typical EU-eligible carcase actually destined for the EU market (mostly striploins, cube rolls, tenderloins, and some rumps), most other cuts from EU-eligible cattle are in fact sold into other HGP-free markets, including China, Beef Central was told.
Grainfed premiums more common
Incentives for HGP-free production are much more commonly used in grainfed slaughter cattle.
Queensland dedicated grained processor Kilcoy Global Foods offers a 30c/kg premium on HGP-free cattle, with current forward contract offers on 100-day ox of 620c/kg (free) and 590c (treated). Those premiums have grown gradually since the launch of the company’s Kilcoy Pure no-HGP program three or four years ago. Kilcoy now conducts one to two days’ worth of no-HGP kill each week as part of its normal roster.
Teys Beenleigh this week offered 570c/kg on HGP treated 100-day grainfed steer, and 25c/kg more on non-implant cattle. The same 25c/kg distinction applied at Teys Naracoorte and Wagga (575c vs 600c).
NH Foods Oakey Beef makes no price distinction on implant use in grainfed or grassfed cattle, from yearlings to 100-day segments. Important to note that Oakey does not hold a chilled license for China.
As arguably the nation’s largest EU beef market provider, however, Oakey produces an abundance of ‘HGP-free’ beef under EU-eligible terms that is not necessarily shipped to EU markets.
* Beef Central’s analyst Simon Quilty has written extensively about the rapidly escalating African Swine Fever outbreak in China and its impact on global beef and red meat trade since August last year. To his credit, he was months ahead of other commentators in identifying and exploring the potential impact of the disease outbreak on world meat trade, despite some early criticism for ‘sensationalising’ its likely impact. If anything, ASF has had even greater impact than Simon Quilty’s early ‘worst case’ scenarios. Click here to view his original report back in August.