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Producers’ Share

Money AUD

According to the MLA AUST. producer shares  climbed in February but eased  in March.

To my way of thinking it is very important that we use the same formula for assessing producers’ share of the retail dollar. One publication quotes the MLA as saying the producer share is 38% in another publication they say Australian producers are getting 58% of the retail dollar.  In 2007 Coles told ACCC that producers were getting 54% of the retail dollar.

 According to the MLA the producer share is predominantly impacted by two variables: cattle prices and retail prices.  In February, nominal steer prices went to record prices of (330-400kg cwt.)  at $4.26. The footnote says it is important to note that the producer share of the retail dollar should be considered with many other indicators – this is especially true in the case of beef when around 70% of production leave the domestic market.

One of the two variables in the domestic market where I have a simple way of working out the producer share of the retail dollar goes like this. A 200kg carcass saleable meat 70%= 140kg at $16.59 equal.  Purchase price of the $4.26 carcass $852 producers share in this case is 36.7%.

The US producer is getting $3.45 per pound and the retail price is $6.27 per pound, in this case the producer gets 55% of the retail dollar. We should remember that the US do not take kidney fat, channel fat or even udder fat are not removed before the scales.  This seems to contribute towards a dressing percentage which comes in about 64%.  In Australia with the trimming we are lucky to get 54% yield. Plus they seem to get some sort of allowance for by-products; this may explain why Australian producers get such a poor return on their cattle.

Dres. %

Live animal

DWT.

Price

Total value

Aus – 54%

470kg

253KG

$4/kg

$1012

US – 64%

470kg

300KG

$4/kg

$1200

US – 64%

1038lbs

662lbs

$3.46/lb.

$2290

 

 

 

 

 

This suggests that the US producer is getting $1278 more per carcass.

If we use the US formula at $4.26/kilogram (CWT) and the retail price is $16.59 in Australia, this means the percentage is in fact only 26% not 37.4% or 58%

The USDA is a government organisation that employs the graders working in the works and draws up the rules.  In Australia we have AusMeats, a joint venture between MLA and the processors, which some say is dominated by the processors.

Saying this, it is interesting to look at Japanese retail prices is the same as what Aust. consumers pay. Even though the Japanese Government put a tax on imported beef from Aus., at 38% plus shipping costs half way around the world.

Imagine if the producer in Australia got US prices on a 470kg live animal he could expect to get $1278 extra for each beast sold. Therefore a thousand cattle sold at these prices would be $1.278 million extra.  Perhaps this is too simplistic, make your own judgment.

Prof Sumner Miller always used to say “why is it so?”  At a guess, a supermarket duopoly that is incredibly profitable along with multinational processors who don’t miss an opportunity to gather any small or large advantage. These companies have huge amounts of money and can buy influence that producers can only dream of.

Hopefully the upcoming Senate enquiry will cast light on why Australia producers are getting such a small share of the beef dollar.


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