Wagyu brands feel the COVID-19 heat

Wagyu brands feel the COVID-19 heat

Beef
IN IT FOR THE LONG-TERM: Vicki and Nick Sher, Glen Leckie at Ballan, near Ballarat, with Wagyu cows.

IN IT FOR THE LONG-TERM: Vicki and Nick Sher, Glen Leckie at Ballan, near Ballarat, with Wagyu cows.

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Brand owners look to make prudent decisions to stay in business.

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HIGH-END beef brands are battening down the hatches in an attempt to ride out drastic declines in demand with the restaurant trade closed and many lucrative global markets on standstill.

The likes of award-winning Sher Wagyu say they have every intention of staying in business.

Changes have to be made, however, and a big one to come this week from Sher has been a halt to purchases of Wagyu Holstein calves from after Easter.

For 25 years, Nick and Vicki Sher's Victorian company Beefcorp Australia has been supplying their Wagyu genetics to a number of dairy farmers and buying back the week-old calves. The calves are then contract reared, grown out on the Beefcorp farms, then finished for 400-plus days in a feedlot.

The 200 Australian restaurants who have Sher Wagyu on their menus are now closed.

So too markets like the United States, Europe, the Maldives and Philippines, while the 10 or so other countries who take the premium chilled beef across more than 40 cuts have significantly reduced orders.

"We've been dealing with this since late January when coronavirus emerged in China and orders were cancelled," Mr Sher said.

"We worked hard to divert product to different markets - it was challenging but we managed it.

"However, as the virus spread and became a global crisis, this has become more difficult, especially with flights cancelled and shipping greatly reduced."

Domestically, many of Sher Wagyu's restaurant customers were already suffering due to the bushfires.

The domestic market is one of the brand's top three markets.

"We are still sending to Japan and we have a good distributor in Hong Kong who already had home deliveries in place but markets like Singapore, which relied on tourism, are dramatically reduced," Mr Sher said.

The 100-year old family owned butcher in New York that was a long-term Sher customer has also shut up shop.

While orders from China are now again starting to improve, it is a long way off firing on all cylinders.

"We are still processing on our regular schedule and working extremely hard to find a home for all the product," Mr Sher said.

But because cattle can't be put into "hibernation", the only way to offset reduced volume out the door is to reduce that coming in.

Thus the notice to calf suppliers that a clause in contracts would have to be exercised.

"It was an extremely hard decision to make - we haven't had to do this in 25 years, even though we've been through droughts and other market downturns," Mr Sher said.

"We have spoken to all the dairy farmers involved and all bar a couple have been very understanding."

READ: Dairy farmers look for options as Wagyu demand dries up

Overstated fears

Seedstock producers and beef brand owners say fears the virus crisis will be the death knell for the Wagyu breed in Australia are unfounded.

Australian is the largest global producer of premium Wagyu beef outside Japan.

Cattle producers can not simply switch systems overnight and most breeders using Wagyu genetics have three years of cattle in the pipeline - and enormous amounts of investment tied up in systems.

While eating quality is the primary reason for using Wagyu genetics, there are other reasons to have Wagyu content, ranging from calving ease to the robust and hardy nature of the animals.

Demand for genetics is not expected to take a massive downturn in the immediate future.

Indeed a world record for a beef semen package of $68,000 a straw was set at the online sale last week for South Australia's Mayura Wagyu.

Worldwide interest came in and saw bulls top at $90,000 and unjoined heifers reach $70,000.

Not the first crisis

Australian Wagyu Association chief executive officer Dr Matt McDonagh said most Australian Wagyu beef product was exported, and some exporters were reporting challenges in freight to key markets, accompanied by disruption in the food service sector.

"Australian livestock markets, including the Wagyu sector may be impacted by the uncertainties. Global supply and demand across all segments of the Australian beef industry may be volatile in the short term," he said.

"However, the Australian Wagyu sector is underpinned by a number of large and well-established Wagyu supply chains, which have achieved world-renown for delivering the highest quality beef across diversified global markets.

"And this is not the first time that the industry has confronted a major global crisis."

Among events of comparable economic impact for the Wagyu industry, Dr McDonagh identifies the 2008 Global Financial Crisis as significant.

"Australian livestock producers and processors in the Australian industry not only survived the GFC and the related impacts on the high-end international food service sector, but the industry then re-emerged with extraordinary growth as global economies recovered. Our Wagyu industry is much larger and stronger than it was back then. We project a similar recovery once the COVID-19 crisis eases."

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