We seem to live in a two-paced world these days, with a two-paced Australian economy, between the mining sector and the rest, and a two-paced world economy, between Asia and Europe.
Meat & Livestock Australia market analyst Dr Peter Barnard has added a two-paced beef market to the list, based on the contrasting fortunes now being witnessed at either end of the beef product spectrum.
It used to be that chilled loin cuts – the tenderloin, the cube roll, the striploin – just walked off the shelf, while it was often hard, and sometimes all but impossible, to find adequate markets for manufacturing cuts and trimmings.
Much has changed.
Chilled loin cuts have decreased in price by about 20pc, while manufacturing cuts and trimmings have increased in price by the same amount.
Dr Barnard believes there are several reasons to explain why it is proving so difficult to sell product that once just walked off the shelves.
The major developed markets of the world, the leading markets for higher value product, continue to deal with the aftermath of the Global Financial Crisis. G7 nations, gripped by soaring debt levels in excess of 100pc of GDP, have had little choice but to cut spending and increase taxes in recent years, which is negative for growth and likely to continue for years to come.
The tough economic conditions are also causing consumers to economise.
Consumers in the US continue to flock to fast food outlets at the expense of fine dining or restaurants, while belt-tightening at consumer level in Japan has seen Australian exports shift away from higher value chilled grainfed product and toward more economical frozen grassfed product.
The rise of emerging markets is another big part of the two-paced beef market story.
Australian beef sales to emerging markets in Asia and including Russia have increased from just 70,000t in 2004 to more than 300,000t last year.
Consumers in those markets have a preference for thinly sliced product and wet cooking, which does not require highly marbled beef and feeds demand for more manufacturing type product.
Watch the price of rice
International food industry expert David Hughes said the beef industry can start to celebrate the emerging opportunities for growth in Asia, but added that there were a few notes of caution.
The price of rice may seem to have little relevance to the beef industry, but Dr Hughes said it could have a larger bearing on demand for beef in Asia in coming years than many realise.
After decades of stability, global food prices have become highly volatile and more expensive since 2006.
In many Asian countries where consumers spend at least half their total household income on food, increases in the price of dietary staples such as rice can significantly curb the amount of money they have available to spend on more discretionary items such as beef.
“I think we are going to see this volatile pressure on staple food prices continue, and I think we should keep this in mind,” Dr Hughes told the NTCA conference.
“Because if (the price of rice doubles), then she (an Asian consumer) will constrain her purchases of special things like meat, which are discretionary, and focus on affording staples for her family.
“So keep that in the back of your mind… their populations are increasing, their incomes may be increasing, but if we get increased volatility and staple food prices it will have a negative impact on demand in emerging countries for protein foods.”
The high cost of beef in relation to competing proteins was another factor in emerging markets, where consumers had much different culinary habits to the developed world.
“They value the front end of the beast more than the back end, and when they cover it in delicious sauces (such as stir-fries, curries and soups), you wouldn’t know if it is chicken or beef, so that is an issue,” Dr Hughes said.
“Beef and lamb are clearly a premium product, and beef prices are more than double the next species down which is pork.
“That reminds us we have to explain to shoppers and consumers why they should pay twice as much more.”
Don’t write off developed markets
Dr Hughes said that while developed markets might be seen as a “little old and sleepy”, their future importance was still not to be discounted.
He used a map of the United States to illustrate the sheer size of the US as an economic entity.
Each US state was marked not with its own name, but with the name of a country that has the same Gross Domestic Product as that state.
Australia ranks as roughly the economic equivalent of New York State.
While growth in the US was slow, it was still home to most of the world’s wealth and that would be maintained for some time to come.
“In 50 years time, those old developed sleepy countries, because they are coming from such a high base, will still be the richest on a per capita basis,” Dr Hughes said.
“So what is the point about that? That is if you're in premium products, you require rich customers.”