Global beef prices settle higher, thanks to China

Australian beef breeders competitive on a global scale: agri benchmarking


Latest results show profitability up, thanks to China demand


THE powerhouse effect of Chinese beef demand on the profitability of cattle operations around the world has been spelled out in the latest red meat producer agri benchmarking results.

Despite drought and higher input costs in many beef-producing regions, especially Australia, profitability rates have been much higher, beef consultant Peter Weeks said.

The beef market appears to be settling 40 per cent higher than what it was prior to 2011 when the China effect started to kick in, he said.

With Lucy Anderton, Mr Weeks co-authored a Meat & Livestock Australia commissioned report analysing the global benchmark network results, which cover 2018, which looked at how competitive Australian producers are.

The cattle network has more than 34 member countries, covering 75 per cent of world beef production and comparative analysis has been happening for the past 17 years.

Production systems, economics, profitability and perspectives facing producers are looked at via deep dives into what are deemed 'typical' operations.

Of the 139 agri benchmark beef farms in the latest research, 80pc of cow-calf operations and 64pc of cattle finishing farms were medium-term profitable in 2018. The most notable exceptions were some winter barn cow calf farms and silage finishing farms in Europe and a few drought-affected South African and Namibian farms.

Seven of the nine Australian farms included were able to achieve long-term profitability. The ones that weren't were Queensland systems severely drought-affected.

Mr Weeks said those rates were higher than previous results - the best year recorded so far for profitability. Australia's long-term profitability had been less than five of nine farms in the past.

"It was a very interesting dynamic that globally, despite the big challenges, profitability has lifted," Mr Weeks said.

"We believe that has been driven by the China demand. Within a decade, China has gone from being a minute importer of beef to being the largest by far."

Another factor at play was the fact herds in South and North America by 2018 were starting to cash in on the holding of extra cows back during the previous three years, Mr Weeks said.

"It was the first year of substantially increased turnoff in these regions and, thanks to strong demand, prices remained relatively good," he said.

Mr Weeks explained there were many reasons beef production did not record similar long-term profitability results as other enterprises, ranging from succession planning to lifestyle factors.

"We don't generally expect long-term profitability across the board. We hope for medium-term profitability - which means businesses are covering all cash costs and depreciation and earning a bit above those," he said.

The results also showed the cow-calf component of Australian beef farms were competitive compared to their main export competitors from North and South America.

Northern Australian cow-calf systems have relatively low stocking and weaning rates, on par with similar rangelands in Montana and Kansas in the United States and Alberta, Canada.

"Breeding productivity is not as high - in part due to the tough environment in the north and frequency of droughts," Mr Weeks said.

"But we do still have room for improvement."

Southern Australia's higher rainfall systems maintain high stocking rates and land productivity globally speaking, similar to European and the more intensive South American systems.

Mr Weeks said it was unlikely the 2019 results would be as solid in terms of profitability in Australia, given the far more severe and extensive nature of drought.

How the sheep guys compare

The global sheep network includes 17 member countries covering 55pc of world sheepmeat production and has been producing the results of comparative analysis for the past eight years.

The latest figures show:

  • Australian sheep farms, in comparison to most countries represented in agri benchmark, are large and diversified businesses.
  • Australia's number of lambs weaned is relatively low in comparison to the 112 average across all farms, primarily the consequence of the more extensive broadacre farming practices and environment.
  • Australian sheep farmers are using their management skills to achieve internationally-competitive labour productivity, growth rates, weaning weights and sale weights to achieve medium-term and long-term profitability.
  • Four of the seven Australian farms analysed in the report improved their medium-term profit in 2018 compared to 2017.

ALSO SEE: Red meat's black swans on the horizon . . . and why it's not all bad news

The story Global beef prices settle higher, thanks to China first appeared on Farm Online.


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