Squealing Processors and Misinformation

John CarpenterOpinion – John Carpenter

Beef processors are reducing shifts and laying off hundreds of workers blaming “record cattle prices” and a shortage of cattle. Butchers are being selectively quoted by the processor friendly online rural media promoting doomsday, going out of business scenarios due to “sky high” beef prices. In the real world, of course, butchers have been folding for decades due to their inability to compete on either price or quality. The meat workers union is also stirring the pot, roasting the old chestnut of a cap on live exports to save Aussie jobs. In union speak cap = ban and ignores the inconvenient truth that many “Aussie jobs” in processing plants are undertaken by foreigners on 457 visas doing work that Aussies won’t touch.

This concerted campaign of misinformation seems to be aimed at cattle producers who, by inference, are being cast as the greedy and unproductive villains in this latest episode of the Australian beef industry soap opera.

AMIEU’s Queensland assistant secretary Ian McLauchlan said ‘good luck to the grazier’ cashing in on the way the cattle market was currently skewed but the federal government needed to look at ‘leveling out the playing field’ for meatworks ‘or eventually Australia will have none.’”

Nothing however could be further from the truth. Make no mistake workers are being laid off due to failure of management in the processing sector and not as a result of a sudden, unexpected cattle shortage which came “out of the blue”.

The large processors through their annual business plans know their requirements for slaughter cattle to a high degree of accuracy. Yet instead of getting more aggressive on price months ago and filling up their feedlots to ensure supply they fundamentally misjudged the market. All of this year they have been waiting a correction that has never come and as a result have been forced to source cattle from a rising spot market. The very dry February to May period turned out to be a market bottom disguised as a top. Rather than anticipating higher cattle prices and acting proactively they have railed against the rising market and have tried to put a lid on it. Reduced shifts and job losses are a problem entirely of their own making.

The supermarkets on the contrary seem to have adapted to the market environment more professionally. My local COLES is still offering their porterhouse steak at $33/kg about the same as last year and indeed the year before. No “sky high” prices for beef on their shelves. It seems they may have wisely decided to meet the market rather than hold out and try to beat the market. Anecdotal evidence confirms this observation. COLES and their suppliers were active in the New England autumn weaner sales that I attended buying large lines of quality young cattle. Buyers from the processors were in attendance, conspicuous in their monogrammed shirts, but were sitting on their hands. One buyer told me that he just didn’t have the money from head office. Now they are crying poor.

The processors and AMIC may regard cattle prices as being high but in reality this is not the case. In fact current prices represent a basic minimum requirement for the survival of cattle production in temperate Australia.

In the financial year just gone, I sold 728 head made up of weaner steers and heifers, supermarket heifers and cull cows and bulls. I achieved an average price of $1110 per head against a fully loaded cost of production of $717 per head. This does not include any interest element because I have no debt. These results delivered a return on investment of only 3.2% and this was in a good year with record, sky high cattle prices.

 

John Carpenter, “Carnegie”, Dungowan, NSW

July 2016.

Comments

  1. Rob Moore says:

    Well done John-
    An article packed with realtime information and personal statistics.I too have never been afraid to show figures to prove a point. The spruikers and commentators for our Industry by and large simply pedal spin and feelgood stories and have very little skin in our side of the raw material-supply game
    Joyce and the LNP deliberately revel in the fact that PRODUCERS have no voice against the levy funded cartel that Anderson the National Party leader…set up in 1997. They impose a compulsory levy on our turnover and let the secondary companies control the trough AGAINST our best interests in many instances.
    Sure- this year we are on record returns for the survivors of the last 20years of whiteanting of our terms of trade. Reform is needed and Joyce ( the farmers fried =bs)has sat on a bipartisan senate report for well over 2 years and has proven himself to be an incompetent fool -imo!




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