Are the green shoots of a more sustainable return to producers being masked by procurement incentives?
It seems that processing and exporting firms should have learned from past lessons. But the current situation suggests, without strong market improvement signals from the end users, there is doubt these current schedules reflect this optimism. Yet, anyway.
When we consider the fragile trading positions many exporting firms are facing, the challenge becomes clearer. The inventory carried over from stock procured at non-market-related values is undermining the operational performance of some companies as they prepare for the upcoming 2024/25 season.
The industry that once built our economy is still struggling to establish a sustainable model.
Focus on the beef sector
If we examine current market returns, against five-year averages, the beef industry is doing reasonably well, affected by the shortage of cattle and the need for a herd rebuild. The returns are still positive, but are affected by the cost of replacement stock.
Demand appears to be strong for grass-fed beef in the majority of our markets. That demand is not matched completely by farmgate prices but with the expected return of China into the market in the next 12 to 18 months, competition should have a positive effect on the prices paid to farmers.
Pressures on red meat farmers from regulation and compliance are forcing land use change. This coupled with higher production costs, have affected margins in the past few years.
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