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Producers Share’of Retail Dollar

For many years producers have wondered who gets what share of the retail dollar. This has become more interesting as the price of cattle has plummeted, whilst retail prices have remained the same or increased. In the not too distant past, January 2012, producers were receiving in excess of $4.20/kg for carcass beef, as stated on the MLA website. Today, using the same indicator, the price of cattle has dropped to $2.80. Yet the price of retail meat has not fallen.

Over the years we’ve seen supermarkets tell the ACCC that the producers get 53% of the retail dollar. Other enquiries had been told that producers get between half and two thirds of the retail price.

In November of last year the MLA, at their AGM in Fremantle, made much of the fact that the producer share of the retail dollar had risen to 36.5%, where it was only 30% in 2003!!

For its part, the ABA questions these figures and how these calculations were arrived at. Subsequent correspondence suggested the MLA were using old figures – probably in excess of four dollars a kilogram- but by that stage the MLA’s own indicator had dropped to $3.20 per kilogram. After that point was made to them, the MLA said the formula relied on things like the export market price and even the value of the Australian dollar.

We suggested that these factors were indeed crucial, but only to the price that producers receive, however these factors would have very little bearing on the percentage that producers receive.

In the flurry of claim and counter claim, the MLA suggested that only 57% of the carcass was saleable meat which of course left 43% for fat and bone.

The ABA had, in the recent past, been arranging informal slaughters and bone out of several ‘average weight’ animals. We suggested (based on these bone outs) that the average yield was in fact about 70% saleable meat yield.

ABA then decided to have a beast cut up with an independent umpire to oversee how much each cut of meat weighed, plus trimmings, hide, offal, bone and fat all weighed out. This meant we could prepare all saleable cuts as ‘case-ready meat’ and correctly weigh and value it. And calculate the weight of the ‘unsaleable’ parts of an animal (though they still bring income to the abattoirs)

The whole trial was overseen by the University of Tasmania and was filmed to ensure integrity of the whole process.

All the saleable meat from that beast was then priced at a major supermarket, using their prices.

ABA then built a calculator that when you change the price of a beast, and the price of each cut, it could estimate the producer’s share of the retail dollar….including the prices for hides and offal. The price that we arrived at was $2190 of saleable meat from the 200kg ‘average animal’ carcase used in the experiment, and included $150 allowed for the hide and offal!!

However when we read the MLA’s summarisation in their Feedback magazine of average retail beef in 2012 it was$15.59, which worked out to be $2410 or $220 above the ABA price.

The point we are making is:

  1. 1. Unfortunately MLA judges the success of their marketing based on retail price of beef, while producers themselves are still receiving the same prices as for the last 20 years.
  2. 2. And, that we calculated prices based on supermarket prices, and MLA calculated a higher price, showing quite a difference between ABA’s $15.00/kg and MLA’s $15.59

We stress that people can calculate their own percentage of the retail price by putting their own weights and prices received for carcass beef into the calculator.

The cutting up of a carcass on film can be seen on the ABA website (www.austbeef.com.au). It is 8 minutes long. This can be seen on the ‘links and blogs’ page, and the calculator can be accessed on the same page. To us it shows just how poorly producers are represented by ‘our Board’, i.e. Cattle Council, MLA, etc, and how the big end of town walks all over producers.

The fact is that the cost of production is outweighing the prices received. If producers do not get a fairer slice of the end dollar they will be doomed to failure.

Though, all producers cost of production will vary, unfortunately, even in the best case scenario the margins are tight with current pricings.

This comes home right now, when processors are paying producers hugely deflated prices for quality cattle they are still

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receiving from the grassed areas of the country (they are not killing the drought-ridden cattle – they are storing them!!) and crying poor as the value of the dollar drops daily, giving them more trading dollars to profit on.

Direct link to download Carcass Calculator: https://docs.google.com/file/d/0B6X6dvS8A388YVhpYWpob2VuWU0/edit?usp=sharing

Author: David Byard & Linda Hewitt

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