Reality check for beef producers in the shift from volume to quality
Price incentives needed to shift focus from volume to quality, analysts say
THE push for more precise price signals to producers to pave the way for a shift away from focusing on kilograms of beef produced and toward quality is gaining momentum.
Progressive operators in both the production and processing sectors say greater value is there for the taking if the gap between what is turned off and what the consumer is demanding can be bridged.
Analysts, meanwhile, say the shift needs to occur for Australia to withstand ever-increasing competition from both other global beef producers and alternative proteins.
A report release today by agribusiness banking specialist Rabobank called A Change in Focus for Livestock Marketing in Australia says the industry needs to remunerate producers to reflect eating quality in order to shore up its reputation as a provider of high-quality and to avoid competing in the commodity trade market.
It’s a sentiment that is increasingly being expressed by producer leaders such as Cattle Council of Australia, who say value based marketing is the future in a world where Australia simply won’t survive in the same space as low-cost suppliers like Brazil and India.
Teys Australia’s John Langbridge spoke recently at an industry conference on the need for payment to relate to true carcase value.
Head of Macquarie Banks’ big pastoral operation, Paraway, Jock Whittle says Australian beef needs to compete as value chains - with all members rising and falling together based on the strength of their offering and their customer loyalty.
Author of the Rabobank report, senior animal proteins analyst Angus Gidley-Baird said unless pricing mechanisms were developed to identify, measure and then monetise eating quality, Australian producers risked losing their seat at the high eating quality table.
All the ingredients for a quality-based system were in place - consumer demand, marketing of beef brands and technologies for better measurement, he said.
The key would be the producer drive to make the shift.
Mr Gidley-Baird believes the big influencers in beef are on board with this thinking but the challenge would be how it is done.
The beef industry had a habit of either over-complicating or over-simplifying things, he said.
Regardless of which of the many marketing options a producer chooses, the key factor currently dictating returns is weight.
Some buyers provide a premium for Meat Standards Australia (MSA), which measures other attributes associated with eating quality, but it is a single rate for achieving MSA grading and doesn’t reflect the incremental improvements in quality along the index.
“Where we need to head is producers knowing what has given them that MSA score and what they can change to shift their score,” he said.
Rewarding on-farm management that delivers on what consumers are willing to pay for will result in a more complex price mechanism, the report says.
Mr Gidley-Baird pointed to the growth in the past five to seven years of a formulae-based system in the United States, where the weekly cash price is adjusted depending on yield and carcase quality.
Five grades for quality have been developed, based on marbling.
“As producers have been given a better indicator of where their quality sits, and a premium in line with that, there has been a dramatic increase in the eating quality of beef,” he said.
Are we confident consumers will pay for better quality?
Extensive consumer insight research points to that but consistency will be vital, Mr Gidley-Baird believes.
He also warned that a pricing mechanism reflecting quality would not deliver improved returns for all producers - in essence it would be a serious reality check.
“There will be product that is not in the highest quality bracket and for each individual it will be a matter of identifying the capabilities and limitations of your production system and balancing that against the pursuit of improved eating quality,” he said.