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Will the price of red meat influence demand?

I’VE got to say, it’s pretty good to be a red meat producer at the moment. Record prices being seen across all states and locally we are staying the trend.

That’s great for the producer but what effect do these prices have on the consumer – are they looking to red meat alternatives?

I caught up with Rabobank senior market analyst, Angus Gidley-Baird to check on what he forecasts.

From a consumer perspective, is the increased cost of red meat going to lead to an increase in the consumption of protein alternatives?
“The cost of red meat is just one of the factors that consumers would take into account when making purchase decisions on alterative proteins. They will also be considering other factors such as taste, nutrition, health, environment, etc.
“I believe for those that are making purchase decisions based on price alone, alternative proteins would need to be selling at a significant discount. A quick survey of a major supermarket online store shows lean beef mince currently selling at $20/kg or $12/kg for regular mince. One alternative meat brand is selling plant-based mince for $21/kg and another is selling it for $18.75/kg.”

How is our domestic market likely to react if the cost of red meat continues to rise?
“Increased costs for consumers will inevitably reduce consumption as products become too expensive or alternatives become a more economically viable option. I believe that we are close to the top, if not the top of our cycle with cattle prices and would expect them to start easing down.
“That being the case, we should see less pressure on retail prices to go up. One of the values of beef is that there are a range of cuts sold at different price points. So, while some prime cuts may be over $50/kg, mince and sausages could be $10-$15/kg which still allows the consumer to have a beef meal in their week.
“So, we tend to see more a trading up and down in cuts rather than necessarily a swap between proteins, but we do have to be conscious of the relative cost compared to other proteins and we have seen beef retail prices rise 13.5% in the last year compared to pork which declined 0.4%, lamb increased 1.8%, poultry increased 0.6%.”

Is this good for the industry as a whole, and its future?
“Strong prices are good for industry. It allows for good returns which in turn allow for increased investment in individual businesses and the industry, allowing the uptake of new technologies and improving efficiency and sustainability - but we must recognise that the supply chain has competing interests, the producers, processors, and retailers want to improve margins, but the end consumer wants to minimise their costs.
“The market needs to find the balance between those competing interests.”

When livestock prices are high – there is a positive flow on effect with more on-farm investment. Do you see this?
“Yes, we do see this, and the results of our confidence survey backs that up.”
“The results of a survey undertaken by Rabobank on farming confidence and future planning suggests that high commodity prices and good seasonal conditions have fuelled Victorian farm sector confidence, offsetting any concerns about a potential fallout from COVID-19 on the industry.
“The survey found Victorian farmer sentiment rose considerably this quarter, with more than one third of the state’s farmers expecting business conditions to improve in the coming year, while more than half expect a continuation of the current, excellent, conditions.”

Very few Victorian farmers forecast conditions to deteriorate.

Confidence is strong across most regions and commodity groups, with Victorian grain growers driving much of the upswing in sentiment, while dairy farmers were also very positive about commodity prices over the year ahead.

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