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In the beef industry, as in most other primary production industries, we see many essays on who gets what share of the retail dollar.  Generally these opinions are put forward by the supermarkets themselves, crying poor about their profit margins.   

Though the supply chain is complex, it is not impossible to unravel who gets what.  Hard data is difficult to come by, and because of that supermarket ‘spin doctors’ are quick to point out that they are operating on very low margins of about 5%.

According to Coles the food supply chain is tangled up in false impressions about what they receive, and the supermarkets are being misjudged because of misguided calculations.  On the other hand, many suppliers would argue that the large supermarkets give evidence or figures that just do not stand up to basic scrutiny.

Producers are a critical part of the supply chain, but recent events and anecdotal evidence have highlighted that producers get only a small margin of the end retail dollar. 

For the supply chain to work effectively, all parts of that chain need to be sustainable and viable. To actually achieve this we need an independent study to establish which part of the supply chain gets what.

The facts and figures are all there.  They just have to be looked for, tested, and followed through realistically. 

In 2007 the ACCC conducted a review into ‘who got what share’ of the red meat industry’s retail dollar.  The then Minister for Agriculture was (rightly) concerned that retail meat was selling record prices, whilst cattle prices were an all-time low due drought. His concerns were not adequately tested because stilted evidence won the day.  

Some of the facts given at the Inquiry simply do not stand up to the most basic scrutiny. However, evidence given by supermarket ‘spin doctors’ was accepted without question, without testing.   Example – one supermarket chain suggested that the producer got 53% of the retail price, but they, the supermarkets, were only managing to make a 3% profit after excluding other costs!

Anyone who deals with the supermarket duopoly knows this is far from reality. 

  • At no time was it established that the freight costs supermarkets and processors talk about are their own internal costs, and that all produce is delivered at producers’ cost to their doors. 
  • It was not established that ‘trimmings’ and offal are removed prior to weighing the very bare carcase, and these trimmings and by-products make money for the supermarkets and processors.
  • At no time was it highlighted that the supermarkets and processors have ‘grids’ (which Graeme Acton rightly says are only made for driving over on a road!!).  These grids are so tight that any animal falling outside one small specification gets the whole side of carcase devalued. 
  • There is the fact that carcases are split in two and sides are weighed separately – because no one body split down the middle will be identical as one side will usually weigh less than the other, allowing differentiation in price paid on a single beast. 
  • It is not mentioned that cattle are bought and sold on ‘dentition’ which means little when the carcase is put through the now-compromised MSA program and is tested and sold on ‘ossification’, or bone density     

Then came the 2011 Parliamentary Inquiry Farm Gate to Plate.  Again it was touted that producers received between half and two thirds of the retail dollar.  After much pressure from ABA the MLA announced that they could identify what percentage producers were getting out of the retail dollar.  ABA found that the MLA calculation was based on 57% saleable meat from a carcass – a significantly lower reading than the reality of 70+%.

Aus meats jointly owned by the processors and MLA suggests that the yield of the carcass would be about 70% on average. After going to press one well known journalist wrote to the ABA quoting a well-known processor saying the yield of the carcass was 70% wholesale and after larder trim for retail one could expect 57% saleable meat. The same journalist then wrote a story, “What are beef processors making out of slaughter cattle?”  Saying grass fed ox cost $3.40 kilogram returning $3.45 a kilogram net 5 cents a kilogram profit. Now with the price going around $3.80 could it be possible that processors are actually losing $0.35 a kilogram at $3.80. Have I missed something or this is the way producers are treated (like mushrooms and fed a diet of B/S.)

The ABA felt the only way to prove or disprove the 70% was to actually get a full cutup of the carcass beef. To this end the ABA arranged for the University of Tasmania to actually oversee the trial and check out weights and prices of retail meat. The whole trial was filmed and saleable meat was put on retail trays of each cut.  All saleable meat could then be weighed as well as fat and bone to obtain accurate percentages.

The trial clearly showed that a yield of 71% was possible and our information suggest that supermarkets when getting contract boning done insist on a 71% yield of saleable meat. Yet one of the larger supermarkets claims in 2008 at ACCC grocery enquiry they only got 60% yield and the carcass.

The next step by the ABA was to develop a computer model spreadsheet calculator. With the spreadsheet, one could put the weight of the carcass and the price paid to the producer for the carcass.  The retail dollar for each cut was established by visiting supermarkets. The costs of boning, killing and packaging, etc. can also be accounted for.

Weights prices can be changed which will automatically update percentages an example 220 kg carcass bringing in $3.80 and the producer gets 35% of the retail dollar if however the carcass is purchased at $2.80 kilogram producer could expect to get less than 25% of the retail dollar.

Surely the time has come for everybody to show receipts of what they get for each, part of the chain and a university or some other institution, like ACCC, that is not bought and sold, to actually conduct trials from the gate to the plate. If everything along enquiry was documented then we might find who is right and who is wrong and we may find the food chain is not as complicated as some would have us believe.


David Byard

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