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Beef Prices vs Market Control

Obviously I am rather passionate about beef and feel there are two things that affect the domestic market for beef. One is price and the other factor that I see to be most important is eating quality; a bad eating experience is a lasting experience.

In Australia consumers have some of the dearest beef in the world. In Japan Australian beef is shipped halfway round the world and is hit with a sizeable tariff.  Despite all this the Japanese consumer is paying the same price as Australian consumers. US producers, until recent times, have been getting double the price that Australian producers are receiving and US consumers are paying 25% less for their retail beef.

At past MLA general meetings we’ve had reports whereas MLA had been quite thrilled with the price of retail beef going up. As they seem to think that any rise in retail prices somehow reflects the success of their marketing efforts, added to which they seem to think that any increase would come back to help producers bottom-line. Finally it has dawned on the supposed experts that people will only pay so much for the beef and eventually there is a resistance to price. The simple fact is whilst beef prices skyrocket consumption plummets.

In 1991 we in Australia consumed 40kg+ of beef per person whilst at the same time we consumed about 22kg of chicken. Now in 2015 we find that consumption of beef has fallen to 28kg and with higher prices consumption will probably fall further whilst chicken consumption has gone up to 45kg. In 1991 the price of beef was $9.80/kg, in 2015 it shot up to $17.80/kg an increase of $8/kg. Over the same years chicken was at $4.80/kg and only rose $0.86/kg to $5.56/kg by 2015. In my mind chicken is affordable and consistent unlike beef which is expensive and highly variable in eating quality. To my way of thinking this is why beef is struggling to hold market share, and if we continue down the same path we may do enormous damage to the beef industry particularly in the domestic market.

Whilst people, like MLA, talk about getting consumers to pay more for their domestic beef I really wonder whether we should be looking at margins. The simple fact is supermarkets in Australia are some of the most profitable supermarkets in the world.  Perhaps we should be looking at their margins and the fact that we have a duopoly that runs most of our supermarkets.

From the ABA point of view we have watched with interest over the years with the information coming from Senate and parliamentary enquiries, MLA and ACCC. Being fed up with what we regard as misinformation, the ABA teamed up with the University of Tasmania to bone, slice and trim a series of carcasses and display all cuts with the total value of each muscle and piece of saleable meat. This whole exercise was filmed in a registered boning room and overseen by the University of Tasmania. This can be viewed on YouTube with the link http://youtu.be/KY9lm9G22Eg.

After completing this exercise we decided to go one step further and create a spreadsheet whereas prices for each cut is identified at retail level in the main supermarkets. The spreadsheet, if one cares to look, is built so as price to kill, price of the carcass, price to bone and package are all taken into consideration and can be altered along with the retail prices. This gives a clear margin of what a retailer would get from any given carcass and the producers’ share including all costs. The spreadsheet calculator can also be viewed on Google Drive using this link https://docs.google.com/spreadsheet/ccc?key=0AqX6dvS8A388dGZVVzBPX0NmZjJyeWI0ZlFwWnN0Smc&usp=sharing.

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