No beef with the US, but local is best
News that US beef now has official access to Australian supermarket shelves has raised questions among households and retailers.
For consumers facing rising grocery bills, the idea of lowering the price of imported beef may seem appealing. However, a closer look at how beef is produced, processed and priced in Australia and the US shows that imported US beef is unlikely to reduce the cost of retail beef in Australia.
In most cases, it will remain more expensive than locally produced options and will be limited to niche markets rather than everyday purchases like ground beef and barbecue steaks.
The root of the problem is the cost of cattle. Australian-made heavy steers are currently trading at around 430 cents per kilogram of live weight, helped by improving seasonal conditions and stable domestic supply.
Trade in similar animals in the US is much higher, at close to 800c/kg liveweight.
This is important for Australian consumers because the price of beef in the supermarket starts with the cost of the animal on the farm.
If US beef processors are paying almost 50 per cent more for cattle, there is no realistic way for US beef to come into Australia and sell for less than the local product.
This difference in farmgate prices translates directly into higher processing and wholesale costs.
In the U.S., lean ground beef and lean 90CL cuts of beef (90 percent lean meat, 10 percent fat) used to make burgers sell for about $4.05 per pound.
Converted to metric at an exchange rate of 0.655, this works out to approximately $13.70 per kilogram in Australian currency.
Processors producing the same lean cuts in Australia are working with much cheaper livestock, with local wholesale prices generally falling in the $10 to $12 per kilogram range.
The cost increases further when U.S. scrap is boxed, frozen, shipped, insured, inspected, cleared, stored and distributed. No importer can absorb these additional costs and place US beef on Australian supermarket shelves at a price below local beef.
The price difference becomes even more noticeable at the retail point. In Australia, lean beef mince with a fat content of around 10 per cent is generally sold for between US$18 and US$22/kg in major supermarkets.
In the U.S., the price of the same 10 percent fat ground beef typically ranges from $6.50 to $10 per pound. Converted to Australian dollars this equates to between $22 and $34 per kg.
In other words, US ground beef is already more expensive locally than Australian ground beef on American shelves. The idea that it can be shipped halfway around the world, repackaged and then sold cheaper than Australian mincemeat is commercially unrealistic.
For retail consumers, this means the arrival of U.S. beef doesn’t translate into cheaper sausages, burger mince, stir-fry strips or barbecue ribs.
Instead, any US beef appearing on Australian retail shelves is likely to be in the premium or specialist categories. Cuts such as USDA prime or premium ribeye steaks, grain-fed briskets for low-and-slow barbecue, short ribs, or branded gourmet burger mixes may appeal to a small group of enthusiasts willing to pay extra for a distinct American flavor or style. These products are not where the majority of Australian households spend their weekly meat budget, and they are not priced to compete with everyday Australian beef.
Some may ask whether increased imports could put downward pressure on prices, at least indirectly, by increasing competition. Again, this is highly unlikely. Australian beef remains cheaper from pasture to plate. Local producers have lower livestock costs, shorter transportation distances and efficient processing systems.
Domestic retailers currently source their meat from an established supply chain that keeps costs relatively under control. U.S. imports will enter this system on a higher, not lower, cost basis, making it impossible for them to act as a price-lowering force in the broader market.
For Australian families browsing the meat aisle, this reassurance is clear. The weekly price of ground beef or steak is determined by Australian conditions, not American imports. Rainfall, feed costs, herd numbers and domestic demand have far more impact on the price of beef than anything arriving in a shipping container from the United States.
The Australian beef supply chain remains competitive and efficient, and US beef is not on track to overwhelm it.
The limited competitiveness of U.S. beef imports should also reassure retailers. Butchers and supermarkets will continue to rely on domestic producers as they remain the most economical and reliable source for the vast majority of beef supply. The best value for consumers will still come from fresh, locally sourced beef.
• Matt Dalgleish is the co-founder and director of Episode 3 (EP3).
