Grainfed product ‘thin’ in wholesale pipeline

Jon Condon, 16/04/2012


AMIC retail chairman Ray Kelso has noticed the shift in demand from grilling meats to secondary cuts The recent handbrake evident in grainfed beef production is being reflected in tighter supplies of grain-finished product in the domestic wholesale market, trade sources said on Friday.

One large wholesaler active in the Melbourne/Sydney/Brisbane east coast markets told Beef Central that supplies of grainfed cuts were ‘thin on the ground’ in the marketplace at present.

There is no shortage of evidence of declining grainfed production currently, typified by the surprise closure of JBS Australia’s Prime City Feedlot on April 5, and wind-backs in throughput at JBS’s dedicated grainfed Beef City and Riverina Beef abattoirs. In Beef City’s case, it is understood kills will be back from 1092/day to the low 900s, and the remaining kill will involve a different mix of cattle.

Elsewhere, another dedicated southeast Queensland grainfed plant, Kilcoy Pastoral Co, is in the middle of a 16-day closure due to the tight trading conditions, and other grain-oriented processors like John Dee at Warwick have wound-back grainfed kills. Some large feedlots on the Darling Downs are currently running at one-third of capacity.

“Grainfed meat is tight in the domestic wholesale market at present, having finally caught-up with demand,” one of Beef Central’s trade contacts said.

“It’s not only due to the plant and feedlot closures, but everybody has backed their numbers off,” he said.

While grainfed product was ‘still there’ in the domestic marketplace, it was not in abundance, but had not yet reached a point where it was affecting sales. Grainfed 70 and 100-day striploins, for example, are currently in high demand – partly due to the relatively higher prices seen recently for grainfed cube rolls (often seen as an interchangeable cut in food service).

A number of large pub and restaurant chains had recently changed menus from summer to winter, and had gone for strips/porterhouse/sirloin over cube-roll/scotch fillet options, partly for variety and partly as a cost saving.

Grainfed generic striploins that were $10-$11.50/kg wholesale earlier, are now $11.50-$13/kg in the marketplace, Beef Central’s wholesaler contact said. MSA grainfed strips were fetching similar money, and had shown a similar $1-$1.50 rise.

Similarly there was not the excess of grainfed rumps in the market as is often seen as this time of year, and there was a ‘bit of a scramble on’ to secure supplies for MSA ageing requirements before sale to food service or retail customers.

“As more grassfed cattle start heading for slaughter after the current short processing weeks are cleared, we see a prospect for a bigger distinction in price between grass and grainfed, due to supply. There will be an abundance of grassfed on the market soon, as slaughter volumes start to rise,” our wholesale contact said.

“The trouble is any grainfed cattle will still owe the plants that specialise in that segment a fair bit of money, but at the same time, there will be a fair bit of good-quality grassfed beef flowing through the system.”

That was likely to see some retailers and portion-cutters, for example, jump-ship out of grainfed into grass – particularly while it carried the quality it is likely to this year, he said.

Large Australian exporters just last week were sending very clear messages to key Asian grainfed beef customers that they will no longer tolerate larger numbers on feed to lose money, but will simply ‘tighten and tighten’ grainfed kills until the current heavy loss-making stops. 

Already that action has had some effect, with grainfed export prices rising the equivalent of 15-20c/lb on certain cuts, on non-contracted cattle, a reliable source said. But much more is required to get close to breakeven.   


Strong pre-Easter sales

Another large wholesaler with an East-coast wide footprint told Beef Central on Friday that the two weeks leading up to Easter (weeks 14 and 15) were his company’s best trading weeks so far this calendar year.

He said there could be some pressure on the wholesale market within the next month, as rates of kill in grassfed cattle started to rise after the series of short kill weeks, and particularly if export demand in North Asia remains flat.       

Most wholesalers are trying to stay fairly forward with their customers.  

Demand for grilling/barbecue cuts is starting to soften, wholesalers report, as weather conditions start to cool-off. While demand for rumps, cubes, strips and tenderloins is likely to ease, secondary cuts better suited to slow-cooking should increase in demand. This includes items like chucks, blades, knuckles and clods, particularly as some can be packed-off into an 85-90CL pack, if required, to service the continued high demand for grinding beef.

With wholesale lamb prices at the lowest level seen in two years, there is also some drift occurring as consumers and restaurateurs again re-introduce lamb as another red meat option, after a period where it was price-prohibitive to many.

This trend is eating a little into beef sales, wholesalers say.

Australian Meat Industry Council national retail council chairman Ray Kelso said he had already noticed the shift in customer mood away from summer grilling meat into slow-cooking cuts.

He said while a lot of retail butchers tended to stockpile supply in the fortnight or so leading up to Easter, in his own case in his two butcher shops in Brisbane, pre-Easter trade was ‘reasonable’, rather than ‘outstanding.’

“It was more or less on par with last year,” he said.

It was no secret that domestic beef consumption was down about 8pc this year due to the prevailing economic circumstances, Mr Kelso said.

"I don’t think there’s a butcher shop around that’s not selling more chicken and pork (cheaper protein option) than they were two years ago, and I think it’s something MLA and the broader industry may be under-estimating in current marketing decisions,” he said.

“Pricing has a lot to do with it. I starting to find in my shops that cube roll and porterhouse steak is being treated more as a boutique line, for the weekend or a special occasion rather than an everyday item.”

“I don’t know whether that is a good or bad thing, but I don’t like it – I’d rather sell more beef – but where once rump steak, T-bone steak and lamb chops were the basis of our business, that is changing now,” Mr Kelso said.

“The fact of the matter is consumers in our area are buying more value-added lines, more chicken, and leaving the $35/kg steak for a bigger occasion.”

The decline in expenditure in next financial year’s MLA domestic marketing budget would not help the situation, Mr Kelso said.



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