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More on Producers’ Share of Retail Dollar

An article titled “Producers Share of the Retail Dollar Slides”, where the author questions “is it a relevant indicator of MLA’s performance?” quotes a chart produced by Meat and Livestock Australia (MLA) which apparently charts the producer’s share of the retail dollar.

The author questions whether this chart rightfully should be used as an indication of MLA’s performance. That is, should the price that producers receive for cattle be used to reflect on what the MLA actually does (or does not do) within the industry to achieve higher returns for their levy-paying grassfed cattle producers.

When first launched at the MLA Conference in Perth 2012, the indicator stated that the average yield of saleable meat from a carcase was 57%.

MLA and its sycophantic followers must stop misleading everyone by using this incorrect percentage.

Let’s put in simple terms: a 400kg beast is killed, processed and gutted. At a 55% yield, the carcass would weigh about 220kgs. That carcass when boned would then yield 68–72% of saleable meat. Using an average of 70%, that leaves 164kgs of saleable meat, and the fat and bone will yield 56kgs.

Readers may remember the ABA actually carried out a university-controlled trial, which proved that 70% was the average cut out of a prime carcass.

To watch this ABA video, go to http://austbeef.com.au/blogs-links/. The video shows clearly the value and amounts of saleable meat.

AUSMEAT, which is jointly owned by both the Processors and MLA, also suggests that the average is about 70%. It should be remembered that AusMeat is jointly owned by the processors and the MLA. Is this why MLA still talks about a 57% yield out of a carcass?

It seems that since the ABA bought this discrepancy to the attention of all producers, our Tactics readers and MLA, the MLA is now trying to keep everybody happy with a compromise. They now frequently vacillate between stating a 57% carcase yield – with producers receiving 32% of that elusive retail dollar…. or a 70% carcase yield in which producers would actually receive only 26% of the retail dollar.

A 240kg carcass yielding 70% of saleable meat equals 168 kgs. Average price of retail beef at $15.67 equals $2,632.00. That 240kg beast has bought the producer (at $3/kg) $720.00, which means he is getting less than 25% of the retail dollar.

But a 57% yield of that 240kg beast equals 136kgs of saleable meat, for a total value $2,131 of which the producer receives $720 or about 30% of the retail dollar. The difference the processors/supermarkets make out of the percentages of meat retrieved from the animal amounts to around $500.00.

Which percentage do you think they want you to believe?

This is what we mean by saying that confusing and conflicting figures and percentages are used to give the impression that producers are receiving a better percentage of the retail dollar than they are.

Also, Producers and readers may not realize that in all these calculations, MLA does not take into consideration the co-products and waste of an animal that is also sold, and has a value of around $200. Is this is a bonus for the processor?

It seems the Australian producer really is disadvantaged. In the US, the producer is getting in excess of 49% of the retail dollar. This is a huge difference of 23% in the cheques received by producers in the two countries.

Why is the yield and ultimately what the producers gets paid so different between these two countries? Is the American government legislating better policy for their producers than the possibly ill-informed Australian government?

There is nothing new in this debate concerning what producers get out of the retail dollar.

In 2006, Agriculture Minister Peter McGauran wrote to the ACCC requesting them to examine prices paid to farmers for livestock, and the prices Australian consumers were paying for retail red meat.

The Minister was concerned that farmers were receiving minimal returns for livestock whilst consumers were paying record highs for retail red meat.

The report is very interesting reading, and gives an insight into how the supermarkets are willing to confuse, and help to confuse, the issue with inaccurate information.

In the 2006 ACCC report, Coles suggested that the producer got 53% of the retail dollar.

Then in their report, MLA suggests that with that 70% of meat yield, the producer would have received 25% of the retail dollar.

In the same report, Department of Agriculture Forestry and Fisheries stated the ‘co-products waste value’ was $220. But one year later at the 2008 Grocery Report by ACCC, Coles suggested that the value of co-products and waste was $40. A massive difference of $180.00 per animal! The ‘confusion process” is alive and well throughout!!

In the same report it was suggested by Coles that the retail price of beef was $10.05/kg. However ABARE suggested that the price was actually $15.67, a difference of $6.00…… not $6 a beast, but $6 per kilogram!!

Coles’ yield of a carcass was 60% saleable meat, as stated by them in the 2008 Grocery Inquiry. Is it possible, as has been suggested, that major supermarkets when getting contract boning undertaken, are insisting on 70% yield?

This would be very easy to prove or disprove. Just go to boning room and follow one day’s throughput.

In the 2012 Parliamentary Inquiry by the Lower House’s Agricultural Committee, the Chairman Dick Adams (Labour) stated in his summation that Coles had advised him that between ½ and 2/3rds of the retail dollar went back to the producer.

Producers and Politicians…….. It is vitally important to know how much of the final retail dollar is going back to the farm gate. If the producer is not getting a price that is above cost of production, whilst processors and supermarkets can be making massive gains out of low cattle prices, then alarm bells should be ringing loudly.

For their parts, the MLA and processors have continued to boast throughout this year about record volumes of, and prices for, meat sold internationally…..but producers know this comes from heavily discounted cattle.

What I find disturbing is MLA have always been very reluctant to give evidence to the ACCC and Parliamentary enquiries that have attempted to establish the producers’ share of the retail dollar.

The fact is processors and the duopoly supermarkets flood any of these enquiries with reams of information that in many cases does not stand up to scrutiny. A questioning and well researched producers’ Board should be ensuring that all prices, weights, facts and figures stated are in fact correct and proven.

It seems there is nobody advocating on the producers’ side. Nor do many producers, peak councils, producers’ boards or any other representatives take any interest in, or indeed challenge, the accuracy of the information submitted.

What is dangerous is that sections of that information are then gathered from these enquiries to help the Government formulate policy. Only then do producers start screaming foul!! When it is too late.

So on this issue, the default position the Government has is based on inaccurate information that has not been ground truth.

According to the processors, they only make five cents/kg on a 350KG carcass!! For a start they have forgotten to add the value of co-products and waste, before we even consider the truth of kill results as found in the above video, and in ABA’s research

Information collated by the ABA suggests that in fact after processing costs, and figuring all the saleable products at export prices, the value of the beast to the processor may be not $16 (as they claim at 5c/kg), but $260.

In the words of the MLA’s MD, Scott Hanson, we need to concentrate on what can be done to ensure that as much of the consumer dollar passes back to the farm gate, allowing producers to reinvest in their production systems, and thereby keep feeding the Australian and global populations.

I suggest that there are a lot of producers out there who are battling to just feed themselves, whilst it is probable that others further up the supply chain are making a fortune, due to the producers inability to get a reasonable price for their livestock.

As it can be clearly seen, irrespective of what volumes or what value meat brings, at retail or at export, producers must get a fair deal. If producers continue to be treated like peasants, the Australian economy will suffer.

With red meat producers receiving very little advocacy, and Governments believing whatever the processors and supermarkets say, there is an opportunity for rural and city journalists to stimulate debate and chase the facts for themselves, all the while not being misinformed by all the confusion and double talk.

The differences between the two streams of journalists would be interesting to read…and analyse.

End.

 

This is a response we received from one reader.  (Name withheld)

 

David, ………… how the authors of the BS from supermarkets can pedal this  with a straight face!!

In the 1980’s I worked with a local slaughter group boning for local retailers (not supermarkets) 

I spent many cold and early mornings with their boners as we boned, weighed and valued retail cuts,  comparing different breeds and types of carcasses for retail value.

The differences were startling.  But we always yielded 66 to 74% – so the Tasmanian University test bone out of 71% is on the money.

 

The drivel sprouted by the vested interests is just insulting.

There is enough yield evidence from historic work of people like Prof Rex Butterfield and Robin Shorthosethat we should not even be having this debate let alone having to do this sort of work to teach people the truth.

 

ABA – roll on!!


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