Australia’s greatest advantage was freedom from disease and provenance, rather than its clean and green image, according to a leading market analyst.
McKINNA et al principal consultant Dr David McKinna told the Australian Livestock Saleyards Conference if the country ever lost its freedom from disease, it would be out of the game.
“People talk about Australia’s clean and green image, that’s actually bull…., we don’t own that, New Zealand owns that - we own safety and integrity,” Dr McKinna said.
“They like Australian food because it is safe and reliable.
“We are competing head to head, with Brazil, and the only reason we can compete is people are prepared to pay a premium, for safety, foot and mouth freedom and BSE freedom.”
But he said producers were now gaining the upper hand, due to stock shortages and high export prices.
“The national herd is a the bottom of the cycle, its been exacerbated, because we have had a few pretty bad, dry years,” he said.
“You have people competing for cattle, for years the beef farmers have been bitching, but they are really starting to bank their money, so they are selling a few Mercs around in the western district, at the moment, I can tell you.”
Farmers were getting around 50 per cent of the retail value of animals.
“That’s unheard of – for example, potatoes which sell at Coles for $2.50, the grower is lucky to get 50 cents.”
Mr McKinna said there had been dramatic changes in the red meat trade.
In 1986 he worked for the Australian Meat and Livestock Corporation, restructuring their marketing.
“In those days, beef consumption was 30 kilograms per head, lamb 25pc, and their were 20,000 butcher shops, in Australia, supermarkets sold 20pc of red meat, exports were 30pc,” he said.
“There was no live trade, saleyards were the main source of stock.”
He told delegates chicken consumption was now 40kg per head, and rising rapidly, while beef stood at 28pc, pork was increasing at 20pc, and lamb was down to 9pc, from 20pc.
“There’s 3000 butchers shops left, Coles and Woolies sell 63pc of all red meat,” he said.
“The majority of livestock is now sold direct, and don’t go through saleyards - we have gone from being a domestic, to an export, industry pretty quickly.”
Improved genetics in chicken breeding meant high quality meat could be produced cheaply, while beef had become quite unaffordable.
Mr McKinna said Asian and Middle-Eastern migrants had also driven the rise in chicken sales.
“While we’re consuming beef less frequently, there tends to be a thing of trading up to better cuts, you might not have as much beef, but you will have MSA graded cuts.”
Supermarkets could now guarantee the quality of the meat they were selling.
“The butcher shops that have remained have transformed into meal solution shops, if you go into a butcher shop, you don’t see the big trays of chops and rump steak, you will see crumbed product, you will see marinated product, you will see pies, ready to put in the oven.”
The export of around 70pc of beef and lamb, was forcing up the price domestically.
“We used to sell secondary cuts overseas, our biggest market was the US, and a lot of it was ex-dairy cows into the grinding trade, mixed with fat to make hamburgers,” he said.
“But now a lot of that is prime grain fed and grass fed.”
Historically, secondary cuts used to go overseas, but that had now been reversed.
He told delegates Australia was a very high cost producer: JBS said it cost twice as much to process a beef carcase than in America.
“We have a very high labor cost, very high penalty rates, labor costs are a real crippler, that’s why a lot of plants are moving to robotics.”
There was also a “back-to-back” relationship from the breeder to the user.
Breeders used to sell to a commercial fattener, who would sell the animal through the saleyards, to an abbatoir.
“Now they are going closed loop, where they are locking in schedules, they are locking in quality systems, prices and so on,” he said.
“Coles and Woolies own the piece of meat, almost right through to the trade on the shelf.
Supermarkets could not get butchers, but it also took “real estate – so it is a lot better to get case ready (meat).”
He told delegates domestic consumption of beef and lamb would continue to decline, live exports continue to grow, direct sales and closed loop supply chains continue to increase, and saleyard numbers will continue to decline.
But Mr McKinna said there would always be a need for saleyards, as supply and demand would fluctuate and they would play a top-up role.
“If you have 100 acre farm, and turning off 20 steers, you are not going to be dealing with Coles.”
