THE beef industry’s short-term, cyclical nature is summed up in one comment this week in the story Beef poised for take-off: “The longer we continue to slaughter our breeding herd, the better the outlook for prices when the market turns around.”
While this is a correct reflection of the fundamentals driving our beef prices, it is also a false economy for long-term, sustainable profitability.
High prices don’t mean a business is profitable if you’ve spent a lot to carry the stock, or you have none left to cash in.
And even when this yo-yo price pattern brings us market highs, recent history has shown it is not high relative to the cost of production and the duration of these highs has also been too short for many to recover from drought.
Tight supply will bring nothing more than a short reprieve for beef – when the drought breaks, we know the next one is around the corner.
The same goes for the market.
Global Roundtable for Sustainable Beef (GRSB) discussions to decide what sustainability means might help beef’s image and give the industry a globally recognised marketing platform.
But it won’t address internal structural issues, such as the backlog of beef, or the vagaries around how marketing dollars are spent.
Meat and Livestock Australia research during the 1990s demonstrated consumers wanted consistent quality.
The market has shown familiarity built through branding is important to encourage affluent consumers to pay more, but not just generic branding.
Supply chains that can support private branding, where more beef has integrated ownership from the bottom up, could provide more opportunity for price setting.
This would allow producers to put more capital into sustainability projects.
Successful brands become price setters, which in turn brings increased stability and responsibility for marketing.
Marketing dollars have more potential return per dollar invested if tied to a brand and are more accountable.
If the beef supply chain can add more value with brands, or more co-operative or family run brands can get started, we will start to see more confidence at the farmgate level, both through increased control and ownership.
Central to all types of sustainability – environmental, social, or economic – is whether the producer is paid enough.
The current situation is clearly not sustainable.