Shoppers may feel they have had a bad deal from recent years of high supermarket food prices for staples such as beef, but in reality Australia's taste for red meat is subsidised by our growing export trade.
Long term retail prices have actually remained relatively stable and modest compared to much greater price volatility endured by cattle producers, says the ANZ Banking Group.
However, while beef producers have copped greater burdens from a decade of increased gyrations in farmgate prices, they, too, are faring better than they might realise.
An ANZ report on the beef industry's increasingly complex pricing and cost picture has noted while Australian farmers appeared to enjoy a smaller cut from the price consumers pay for food compared to their overseas peers, they made more profit from their farmgate prices.
Based on a long-running US Department of Agriculture "Food Dollar Series" comparison, supply chain data crunched by the United Nations Food and Agriculture Organisation showed Australian agriculture paid similar costs for labour, about 20pc less for imports and about 40pc more in taxes, but reaped higher operating surpluses.
The FAO data showed the Australian wholesale and retail sectors scored a bigger share of every dollar spent on food at 50 cents, compared to 46c in other countries studied.
However, while farmers here got 19c from every food shopper's dollar, and processors took 18c, the global average for farmers was better at 22c.
Importantly, ANZ said despite big farm cost increases of late, jumping at least 30 per cent between 2020 and 2021, the beef sector, and livestock production in general, remained one of Australia's lowest cost farm sector enterprises.
ANZ's "Carve up" report also noted that while beef's supply chain prices were now more volatile than ever, that volatility was also providing ample opportunities for producers to make the most of changing market trends, such as more demand for younger, lighter stock.
The report highlighted how global markets had become a key driver of a welcome overall rise in demand for Australian beef.
Conveniently, export orders had grown at the same time supermarkets had managed to "keep a lid on retail prices to maintain consumer demand".
The report said simply looking at how the domestic retail price was distributed missed the largest part of the beef market picture - the 70-plus per cent of beef and veal exported each year.
Prior to 2014 farmgate and processor prices and retail values had all tracked relatively closely with each other, but as saleyard price categories became more volatile, consumer prices broke away from the producer payment trends.
This coincided with total export volumes and export prices growing significantly.
"This strongly points to Australia's export markets being the major contributor to both farmgate and processor prices jumping away from retail," the report said.
"In short, it could be said Australia's export markets were subsidising relatively low and stable retail prices."
A key factor had been changing domestic demand, and a shift from predictable saleyard returns to marked price jumps, and falls, starting around 2010.
Diverging cattle prices (per kilogram) between processor, feeder and restocker steers had become a notable trait of the market.
The increasing margin between the categories had provided an opportunity for producers to take advantage of selling younger lighter stock in a good season, encouraged by the growth in feedlots.
A record of almost 1.3 million cattle were now on feed in Australia.
"The ability to sell lighter cattle for a higher price per kilogram has seen producers rethink their production system," the report observed.
"They now focus on producing a higher number of stock which grow rapidly to a saleable light or feeder animal category, with some building long term relationships with backgrounders or supplying feedlots direct."
ANZ agribusiness head, Mark Bennett, said more complexity in the supply chain, and more volatility in pricing had created more opportunities for producers to diversify, reduce risk and take advantage of seasonal upswings.
"Beef isn't what it was even just five years ago, when demand was driven by too few cattle on the ground. It's now the opposite," he said.
"Australia's high herd numbers and a gap in the market left by the US drought, are leading to more demand for exports and continued upward pressure on domestic cattle prices."
Mr Bennett said given the Eastern Young Cattle Indicator was currently trading around 25pc below trend, there "certainly is an expectation" strong export demand would put upward pressure on domestic saleyard and retail prices this year.
ANZ's report also showed a division of profit breakdown after the farmgate, which suggested the whole supply chain was absorbing the relatively stable beef prices being passed on to consumers.
"Strong export prices are proving to be a useful offset for an industry seeking to maintain lower prices at the retail end," he said.
"Today's cattle industry might be more volatile, but there are big opportunities for the agile and responsive producer to make the most of any prevailing conditions."
Andrew Marshall
Andrew Marshall is the group agribusiness writer for ACM's state agricultural weeklies and websites. He is a former editor at The Land and has worked in various Rural Press group roles in Canberra, North Richmond (NSW) and Toowoomba (Qld).
Andrew Marshall is the group agribusiness writer for ACM's state agricultural weeklies and websites. He is a former editor at The Land and has worked in various Rural Press group roles in Canberra, North Richmond (NSW) and Toowoomba (Qld).
