But the rise in beef prices can be readily explained.
According to Rabobank senior animal proteins analyst Angus Gidley Baird, the continued dry seasons across many of Australia’s cattle producing areas has seen a dramatic reduction in the Australian cattle herd as producers were forced to sell cattle because of lack of feed.
“Industry figures estimate there are 25.9 million head of cattle in Australia. This is a slight rise on last year’s estimated number, which we believe was one of the lowest cattle numbers we have seen for 30 plus years,” he said.
Mr Gidley-Baird said a smaller cattle herd means less cattle produced each year which consequently limits supply.
“Under the normal demand/supply market operations a reduction in supply will mean the market adjusts by rising prices – that is, the same demand competes against itself for less beef, effectively driving prices up,” he said.
Read the latest Rabobank Beef Quarterly ‘Global and Local factors drive Beef Prices’
Record Beef Prices
Mr Gidley Baird said Rabobank’s calculations from the Q1 2021 Consumer Price Index (CPI) figures shows the average Australian beef retail price is around $23.87/kg.
“In nominal terms, this is the highest beef price since records began,” he said. “But adjusting for inflation, the current beef price is only just below the peak seen in the late 1970s when they reached $25.23/kg (in today’s terms).”
In the last year, Mr Gidley-Baird said beef has seen some of the largest price rises of all the proteins.
Beef has increased by 8.4 per cent (between Q1 2021 and Q1 2020) and 17.9 per cent (on Q1 in 2019).
In comparison, the whole meat and seafood category has risen by three per cent compared to Q1 2020 and dairy is up by 0.4 per cent. While fruit and vegetables have contracted by 3.1 per cent and bread and cereals are down by 0.2 per cent.
On top of supply and demand there are a couple of other factors that are also playing their part at the moment, he said.
“Firstly the improved seasonal conditions mean beef producers are also in the market buying what limited cattle supplies there are to try and restock their properties,” he said. “This adds additional demand for cattle and as such, we have seen cattle prices reach new records.”
In inflation adjusted terms, Mr Gidley-Baird said cattle prices have just nudged over the records set in the late-1970s, with trade steers currently selling for around $6.50/kg (cwt).
“But one could argue there is a degree of tolerance in the beef market at the moment due to the Covid situation,” he said. “While no one likes to pay more, limited travel options and some restrictions to food service have pushed retail food sales to levels 10 per cent higher than what they were pre-Covid.”
That said, we believe beef prices are at their high point, he said.
“As cattle numbers increase and cattle producer demand eases we will see cattle prices contract and that will take the pressure off beef prices.”
“But we do believe we have set a new benchmark and we do not expect cattle and beef prices to contract to previous lows.
“All the more reason to search out that quality piece of beef for an enjoyable eating experience.”
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