Bigger slice of the steak pie

It’s no secret the Australian agriculture sector is constantly changing. Farming today isn’t the same as it was 20 years ago. 

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When we talk about advancements in the sector, most often we look to changes in on-farm technology, from feed and pasture management to machinery. Of less focus are changes to the supply chain which significantly impact how farmers run their operations, diversify their risk and manage their slice of the (steak) pie.

"While cattle producers bear the biggest ups and downs in saleyard prices, both the processor and retailer are taking the losses and gains necessary to keep the consumer price in check.”

Changes to the industry have made saleyard prices more volatile for beef producers in the past 20 years. But increased diversity in the supply chain has also given producers more opportunities to diversify for risk and take advantage of price rises in good seasons.

Sitting behind this price volatility is the opportunity presented by strong growth in the value of beef exports. Domestic factors played a key role in price rises, particularly the growth in restocking activity following droughts.

Those price rises also came at a time when the total value of Australian beef exports grew substantially. Some argue Australian beef exports have had little impact on the saleyard price or the bottom line for producers who don’t export. 

A new report by ANZ Agribusiness suggests the opposite is the case. An alternative, high-price export market will provide the necessary competitive pressure to raise cattle prices for both domestic and international markets.  

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Export growth

What does this mean for beef producers in the short term? The opportunity available for Australian exports as United States rebuilds its herd is well documented. But the impact of a growth in exports should also flow through to the domestic market – from saleyard to retail.

Which brings us to the issue of retail beef sales and how prices at the supermarket and butchers have responded to the recent swings in the market. 

Significant attention has been to paid the relationship of price between the saleyard and the consumer. The perceptions is that retail prices followed saleyard prices up – but not down.  

Over the longer term, retail prices have remained relatively steady in the face of increasing volatility in saleyard prices as retailers and processors absorb the increased costs.

While cattle producers bear the biggest ups and downs in saleyard prices, both the processor and retailer are taking the losses and gains necessary to keep the consumer price stable. 

For many processors the lucrative export market is providing some additional income to cover higher cattle prices.

On average, saleyard to retail figures suggest cattle breeders are receiving just under 25 cents of the retail dollar, the fattener just over 7 cents, wholesalers (including transport and other marketing activities) just over 26 cents and retailers just under 42 cents.

This will obviously differ between producer and the longer term contracts entered in to, but provides a fascinating insight into where the retail beef dollar flows. 

While it doesn’t answer the question of ‘what is a fair share’, it does provide an indication of what producers receive and how increases in the cost of production may impact retail pricing and producer margins in the future.

Madeleine Swan is Associate Director for Agricultural Research with Australia Commercial at ANZ

This article is based on the Australian Beef “The Carve Up” report by ANZ Agribusiness released in May 2024.

The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.

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