the future of australia’s cattle industry: grass or grain? address to abare outlook conference...
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The future of Australia’s cattle industry: grass or grain? Address to ABARE Outlook Conference March 2006. Peter Barnard General Man ager Economic, Planning & Market Services Meat & Livestock Australia. - PowerPoint PPT PresentationTRANSCRIPT
The future of Australia’s cattle industry: grass or grain?
Address to ABARE Outlook ConferenceMarch 2006
Peter BarnardGeneral Man agerEconomic, Planning & Market ServicesMeat & Livestock Australia
Significant growth in feedlotting sector- grainfed cattle have grown from 9% to 34% of turnoff in 13 years- grainfed beef now accounts for around 40% of beef produced
1991 1995 2000 20050.0
1.0
2.0
3.0million head
0
12
24
36%
marketings grainfed as % of adult slaughter
Address outline
• Nature of feedlotting in Australia
• What has driven the increase in feedlotting over the last 15 years?
• Is this increase likely to continue?
Australia is not a grain feeder, but a grain finisher
<50 days 50-100 days 100-130 days 130-200 days > 200 days
Days on feed
0
10
20
30
40
50% of lot fed cattle marketed
80% of cattle are fed for less than 130 days
CRC consumer sensory results related to feedlotting• Feedlotting increased carcase weights and fatness traits (both
marbling and fat depth) and decreased ossification scores
• In consumer sensory tests feedlot beef had higher flavour and juiciness scores, but this advantage disappeared once adjusted to the same intramuscular fat and age.
• In other words, if pasture fed beef could be finished to the same intramuscular fat levels at the same age there would be no difference between feedlot and pasture fed beef.
• Put simply, there is nothing magical about the feedlotting effect.
• These results support the MSA approach of describing the feedlotting effect using the outputs of carcass weight, ossification score and marbling rather than a feedlot effect per se
Cost changes are NOT driving the increase in grain finishing
1990 1992 1994 1996 1998 2000 2002 20040
2
4
6
8Ratio
Ratio of beef to feed grain prices
Growth has been mainly to Japan and the domestic market
1992 1995 2000 20050
200
400
600
800cattle on feed '000 head
Japan Korea Domestic Other
Growing MSA use on the domestic market Of the 620,000 head of MSA cattle graded last year about 60% were
grainfed & 40% grassfed
99/00 00/01 01/02 02/03 03/04 04/05 05/060
200,000
400,000
600,000
800,000
1,000,000
Domestic market use of grain finished beef driven by supermarkets Do not like marbling Simply want consistent supply of lean tender beef
Beef exports to Japan: boost after US BSE – grain and grass
89 91 93 95 97 99 01 03 050
100
200
300
400
500exports '000 tonnes sw
0
10
20
30
40
50% grainfed
grassfed beef exports grainfed beef exports grainfed share
Most Australian brands at Japan retail are grainfed
Grainfed beef
Hanamasa - Grassfed & Grainfed beef
Rangers Valley Grainfed beef O’connors - Grainfed beef
Hannan -grainfed beef Rockdale - Grainfed beef
Costco - Grainfed beef
Foodservice is a mixture of grain & grass fed beef
Also profitable niche for longfed Aussie beef in Japan (13% of all cattle on feed)
Is the future in grass or grain finishing?- grain principally
Why?
1. Production advantages2. Market trends
Production advantages of grain finishing Allows graziers to turn off cattle younger
– freeing up land for more cows or other pursuits (eg cropping)
Allows for stable supply alliances and forward contracts– Woolworths and Coles currently forward contract about 80% of
supply– Vast majority of grain finished beef for Japan is through
vertically integrated feedlot/processing/exporting/importing operations or forward contracted
Reliable supply all year every year, regardless of season
If pastures look like this all year every year grain finishing would be needed less
But unfortunately they can look like this or much worse
Rainfall shifts in mm/decade 1950-2003 (BoM and DPI&F).
.. and it is becoming drier
Safety Deliciousness/Taste
Freshness Price Healthy0
20
40
60
80
100% of consumers mentioning attribute as a purchase driver
2002 2003 2004 2005
Taste increasing in importance by Japanese consumers
Potential grainfed beef export growth
2003 2005 2014 % on 2003Japan 111 200 220 98%Korea 8 20 40 400%other 15 16 40 160%
Total export 134 236 300 123%
Total grainfed beef exports to more than double by 2014 compared to 2003
Up almost 30% on extraordinary 2005 level Could prove conservative, given expansion in feedlot capacity
already in the pipeline
Expenditure on beef by Australian consumers
95 96 97 98 99 00 01 02 03 04 05p0
1
2
3
4
5
6
7A$ billion
A 70% increase in expenditure over the last decade
Improved eating quality is one of the reasons behind the 70% rise in consumer spending on beef the domestic marketOverall how would you rate the quality of beef you buy nowadays?
7 out of 10 or better 80%
How would you say the quality of beef has changed in the last 3 years?
Improved a little / a lot 42%
Grainfed beef on the domestic market Estimated 70-80% of cattle by major supermarkets are
currently grainfed– Generally 50-70 days
Estimated 45% of beef on domestic retail and food service is grainfed – likely to rise to about 60%
Plus forecast 15% expansion in local consumption by 2010 – mainly through supermarkets and restaurants
Australian grain can be more costly
1990 1995 2000 20050
50
100
150
200
250
300
350A$ per tonne
Average Australian feed grain price Average FOB price for US No.2 yellow corn
Security of stockfeed supply Feedlot demand for grain will probably double before 2020
– 1 in 2 Australian grain producers producing for meat by 2020 (Grains Industry ‘Single Vision’)
Yet grains needs are not always met and ethanol production needs
could further deplete feed grain supply
Feedlot industry cannot cope with regular sharp jumps in grain prices – as competitors (US and South America ) pay world parity prices
The beef industry to remain internationally competitive needs guaranteed access to world parity priced grain
Conclusion Grass or grain? Not the right question.
Australian system is built on integration between pasture and lotfeeding
Beef & dairy are the only industries that use feed grain who are internationally competitive on global markets
– Efficiency of pasture production drives this
Australia does not have a comparative advantage in feed grain production
For grain finishing to further expand to meet customer needs access to world parity priced grain is required