The ABA has a broad congregation of members and I quite often get some interesting takes on various topics. John Carpenter has agreed to allow his opinion to be shared on this forum. John attempts to focus on the equations regarding export and consumption figures of beef and their accuracy.
DOMESTIC BEEF CONSUMPTION – PICK A NUMBER
No one knows for sure how much beef is consumed annually in Australia. The reason being is that there is no system of data capture for opening and closing inventories held by processors, wholesalers and retailers. Domestic consumption numbers put out by government agencies like MLA are only guesstimates based on undisclosed assumptions.
This is what we do know for sure: The Australian Bureau of Statistics (ABS) produces monthly statistical series for:
- Cattle slaughter excluding calves; in calendar 2015 was 9,007,300 head.
- Beef Production; in calendar 2015 was 2,514,899 tonnes cwt.
- Export; in calendar 2015 was 1,285,077 tonnes cwt. It is important to note here that ABS converts “bone-out” exports back into a “bone-in“ equivalent by using a factor of 1.5 which would equate to a saleable meat yield of 66.7%. Unless this was done they would be adding apples and oranges.
So based on these hard numbers;
Since there is no inventory data , we need to guess how much of this “balance” was consumed by the domestic market. MLA guesses this was about 660,000 tonnes cwt. MLA calls this number “domestic utilization”. Based on an Australian population of 23,940,000 (ABS) at December 2015, this equates to per capita consumption of 27.5 kg.
Subtracting MLA’s utilization from the balance number leaves 569,822 tonnes unaccounted for which could only have been added to inventory. This seems like an awful lot of beef left on the shelves and equates to almost 3 months production and over 10 months of domestic consumption.
I would suspect that the retailers would only be holding a few weeks inventory which means that most of the stock was held by the processors. I can speculate two possible explanations for this anomaly;
- The domestic market is actually much bigger than MLA estimates. It has become “beef industry” folklore that Australia exports 65% of annual production but this is not correct. The hard number from the ABS shows that we only exported 51% in 2015.
- The processors reacted optimistically to “bargain basement” cattle prices by producing ahead of the demand curve on the belief that they would be able to move the product. In effect they over produced and were left with too much inventory on hand. They have been persistently blaming a “cattle shortage” for layoffs and shift reduction but the real reason can be found in the need to liquidate inventory.