SUPERMARKET giant Woolworths has cut its quota of feedlot cattle in the most significant sign yet that high beef prices are pushing Australian consumers to cheaper cuts and even to cheaper proteins.
Analysts and industry leaders have long been flagging the imminent nature of hitting the point at which the rising price of beef on supermarket shelves and in butcher's cabinets would lead to consumer pushback.
ANZ's latest agri commodity report, released today, warns changing economic conditions are likely to impact the choices of meat of domestic shoppers and this may start to ripple back through the beef supply chain.
ANZ's executive director of agribusiness research Michael Whitehead said whether it was the mortgage or at the petrol bowser, costs of living were rising and that would flow back to decisions about what meat people buy.
"The thing that has long been hanging over beef's head has been relatively flat chicken prices," he said.
"So it's not just switching to mince and sausages, or away from branded beef, but to other animal proteins."
While retail beef prices have been moving up for more than two years, it is believed the pandemic provided some protection.
Mr Whitehead described lockdowns as an 'unreal' period where a number of factors combined to see demand for retail beef skyrocket.
It perhaps delayed the effects of record cattle prices on retail demand for beef.
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Flowback
The Woolworths feedlot allocation cut, combined with the labour shortage crunch at meatworks, has already taken a toll on feeder prices, according to Tim Jude, livestock and commodities broker with StoneX Financial.
Feedlot pricing and transactions last week covered a spread of $5 to $5.35 a kilogram (live weight), with saleyard price ranges widening to $4.86 to $5.58/kg as uncertainty increased in the market, Mr Jude's weekly market comments said.
The Australian northern cattle feeder price fell to $5.25/kg. At the beginning of March, it sat at $5.77.
Mr Jude pointed to cost-of-living increases pushing Australians away from premium cuts of beef as being behind the Woolworths' move.
The supermarket could fill demand for non-prime beef using lower grade and grass-fed cattle, he said.
"The Woolies specification overlaps with the bottom end of the Argus northern feeder cattle specification, so the cutting of the feedlot quota may flow through into price assessments in the coming weeks," he said.
"It had an immediate effect on backgrounder cattle prices, particularly for those that could be grown to meet the Woolworths specification."
Mr Jude also said labour shortages were creating uncertainty across the beef supply chain.
"Some feedlots are keen to lock in kill prices to avoid a spring flush of cattle coming up against an inability to increase slaughter rates because of a lack of abattoir workers, which could pull back cattle prices," he said.
"This is increasing processor confidence that they can start pulling kill prices back, which they argue they need to because of difficult selling conditions in key markets like Japan and South Korea.
"Some integrated feedlot-abattoir operations are trying to signal a need for lower feeder steer prices by issuing grids as low as $5/kg, although it is unclear how many cattle they are securing at this price."
Woolworths response
A spokesperson from Greenstock, Woolworths' red meat wholesale business, provided a statement this afternoon.
"We've recently notified one of our integrated processing partners of our intention to reduce volumes from September in response to softening in the domestic wholesale and international markets.
This approach is in line with many other processors' responses to changing market conditions.
The decision is predominantly driven by the international market, with retail demand in our Woolworths supermarkets experiencing a small decline due to beef prices and the cycling of higher COVID-driven volumes last year.
We provide all our partners with a forward demand plan to ensure they have adequate notice of any changes.
Our focus will continue to be on maximising carcass utilisation to deliver greater value to our international, wholesale, food services and retail customers, while minimising waste."
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