November 5, 2007
High feed prices threaten viability of Australian beef
Australian beef is the latest commodity to be hit by high feed prices with farmers finding themselves in a dilemma of cutting grain feed or taking a huge cost slug.
The crunch comes as the red meat industry is winning back consumers, having rebuilt confidence after many Australians turned off beef in the 1980s.
About 40 percent of beef cattle are grain-fed or lot-fed.
Australian chicken growers also rely heavily on grain to feed their stock.
The beef industry is warning that more cattle will have to be fed on grass, meaning that retailers will face a squeeze on supplies of premium beef.
Almost all farm commodities are in short supply because of poor weather cutting crops, grains being diverted to the biofuels industry, and the China phenomenon, where a once rice-based diet is being displaced by a switch to Western foods, including dairy.
Global dairy commodity prices have risen more than 110 percent over the past year, with milk prices in some parts of the US doubling since 2004.
Companies that depend on agricultural crops have been hard hit, with Kellogg, General Mills and Kraft Foods either increasing prices or reducing the size of cereal packages.
The record high grain prices, and projected 2 million-tonne shortfall of grain on the east coast, threaten the gains made by the Australian red meat industry over the past two decades.
Meat and Livestock Australia marketing general manager David Thomason said there had been a "terrific change'' in the overall confidence of consumers in red meat.
Thomason said there were several reasons why consumers no longer needed to ask "how's the beef'', one of them being the emergence of the lot-feeding sector and the growth of grain feeding.
Last week, the Australian Bureau of Agriculture and Resource Economics forecast a combined wheat, barley and canola crop of 18 million tonnes, well below the June forecast of 33 million tonnes.
Australian Lot Feeders Association vice-president Jim Cudmore said the shortage of grain was "horrendous''.
He said his own grain crop back in September promised to be the best for years, but a frost killed half of it. Then five days later temperatures hit 34 degrees, and a drying westerly wind blew for over a week and "just killed the crop''.
Federal Agriculture Minister Peter McGauran last week approved stockfeed imports, including wheat from Canada, Britain and Argentina; corn and sorghum from the US and Argentina; and soy from Argentina and Paraguay.
Cudmore says grain-fed or lot-fed beef "accounts for all the growth in the Australian beef industry over the past 10 years.
He said 70 percent of all beef supplied to supermarkets is now grain-fed.
There are now 23 percent less cattle on feed, compared with this time last year, and Cudmore fears the number will fall at least another 15 percent.
He said it would be difficult to pass on the increased cost of grain in meat prices.
He worried that, in an attempt to keep prices to consumers down, supermarkets would sell beef that had shorter periods on grain.
Red meat consumption was at its highest in the 1970s, when an oversupply pushed prices down and consumption up.
In the 1980s, though, red meat got some bad press and consumption fell.
Thomason said the reputation of red meat had changed. There was no doubting the impact of the highly successful CSIRO Total Wellbeing Diet, which recommended a total of about 800 grams, fresh weight, of lean red meat a week. "There is a lot more good news now coming out of the research for red meat,'' Mr Thomason said.
Peter Weeks, market information analyst with the Meat and Livestock Corporation, said consumption of red meat -- after falling to a low of 34kg a person in 2001 -- was starting to pick up and would be about 36kg this year.