After Woolworth’s success with its $13 million of lamb discounting last year, which farmers paid for indirectly through lower lamb prices, Woolworths have decided to slash beef prices by at least 29% for the next six months.
Woolworths say they are expecting to absorb about $14.7 million into beef sale costs in the next 12 months starting this week. Already they have started by slashing the price of MSA graded rump steak from about $19 a kilogram to $13.50 in a bid to lure more traffic through shopping aisles.
Based on the consumer response to its ongoing lamb campaign, introduced last August, it is anticipated that is most popular beef lines could see a jump of 30% in sales.
Woolworths insists the ‘on-farm’ prices they pay for lamb and beef has not been trimmed to accommodate its marketing drive, and livestock producers will benefit from the lift in demand. We do ask how, as cattlemen, how it is possible to continue receiving pre-2001 prices for cattle.
Furthermore, Woolworths insist they are paying above saleyards prices for lamb and beef, in most cases this is true, however what they failed to mention is the huge amount of boxed beef they buy from the processing sector.
You can imagine if demand increases for Rumps, and a carcass has minimal amounts of Rump steak on it, then Woolworths will have to buy larger quantities of boxed rump. More than they normally would.
This then brings into question, ‘Where does the beef come from?’ It is obviously MSA graded, however, MSA has been broadened to include aged cows and the boning groups range from 1-20. This is a vast difference in eating quality, while giving little idea of the actual eating quality
It is interesting to read research showing many customers have regarded steak as too expensive to serve, except on special occasions. Is this one of the reasons that the consumption of beef is going down and if so why is it so expensive?
Could it possible that while producers get such a small portion of the retail dollar, that others like the supermarkets are receiving large margins.
If this is the case should the industry actually try and work out who gets what along the lines of the calculator that the ABA has developed?
During the last week I have been doing the rounds of wholesalers, to find out their prices on MSA rumps. The cheapest I could find was $5.80. These were large rumps clearly off an aged animal, but still MSA classified.
I found small rumps that are suitable for the supermarket trade with the going price slightly in excess of $7 a kilogram. These prices are based on one box or carton about 20 kg. Supermarkets like Woolworths would not be buying 20 kg boxes; they buy 20 tonne container loads.
I am sure the price reduction on a container load would be even further reduced. One must remember that we have a glut of spinal cuts and rumps on the export market.
If Woolworths is buying rumps for $6.50 kg and selling it for $13.50, and have a trim and waste factor of slightly less than 10%, then the rumps would cost roughly $7.0 a kilogram. So rather than a loss, they would be making a neat profit before costs of $6.50 per kilogram. This conversion is in excess of 40% – not bad at all!
Perhaps these are the sort of projects that Cattle Council, as the ‘Peak Body’ for beef producers, should be in fact investigating, so everyone can get a better understanding of who gets what from the retail dollar.