Let’s talk about the pig in the room – Discussion piece

08 October 2015

The dynamic protein battle ground is about to see another shift in the domestic market and not in the direction industry is expecting.

The combination of high Australian beef production, a weakening Australian dollar and strong international demand has caused Australian beef exports to continuously reach record highs over the past two years.

However, back in the domestic market, per capita beef consumption is gradually falling as retail prices slowly creep higher, while overall protein consumption remains flat.

For several years chicken has been replacing beef on menus and retail shelves, however Australian chicken consumption has now plateaued.

The product that’s registered the greatest growth in domestic consumption is pork – and most of that has been from imported processed product, like ham and bacon, over fresh pork.

However, beef should be considered the number one protein of choice on the Australian consumer’s plate. Not only is it packed with protein, iron and zinc but nearly 100% of the beef consumed in Australia is produced in Australia.

Pork on the rise

Australian pork production has been slowly increasing for several years, with volumes for the year-to-July up 3.4% year-on-year at 371,000 tonnes cwt (ABS). Interestingly, very little product is exported and for the 12 months to July 2015, only 36,783 tonnes swt were shipped – compared to the 1.3 million tonnes swt of Australian beef over the same period.

Boosting pork consumption is imports. Over the past 12 months imports have accelerated, with 165,580 tonnes swt received, up 17.6% from the same time last year.

The pork industry has some significant production advantages over beef, including the ability for an average 2.25 litters per year (at an average size of nine piglets per litter).

Furthermore, on the back of near record US corn production, global feed grain prices are set to remain low for the coming 12 months. With plenty of affordable grain available, domestic pork production is unlikely to waver anytime soon.

On the import front, while no fresh pork product is able to enter the country, the weaker Australian dollar against the US will likely see reduced imports from that market, yet will be offset by greater imports from the EU.

In short, the weaker Australian dollar won’t necessarily mean reduced imports - just a shift in where they’re coming from, while at the same time, Australian pork production isn’t likely to slow.

What does this mean?

Australians are still large beef consumers on a global scale. According to OECD-FAO consumption statistics for 2015, Australia ranks fifth behind Brazil, Argentina, Uruguay and the US, but still sits above countries with similar eating habits, like Canada, the UK and NZ.

The recent lift in retail beef prices doesn’t look to be lowering again anytime soon and considering chicken consumption appears to have plateaued, pork is more than likely going to fill the retail cabinet’s space and become an appealing alternative to beef.

However, the domestic market remains incredibly important, as the single largest market in volume and value terms for Australian beef, accounting for 26% of veal and beef production in 2014, at 717,000 tonnes cwt, valued at $5.9 billion. Approximately 62% of beef is used at the retail level and the remaining 38% in foodservice.

Nevertheless, in a situation where Australian beef production is about to decline significantly, it’s critical for the community to understand the nutritional advantages of Australian beef.

Maintaining the message

Australia is known for its quality produce, high food safety profile, traceability and sustainable beef attributes which is why our beef is so popular and remains in high demand around the world.

The demand for Australian red meat will always exist. Domestic consumption in 2015 is expected to average 28.8kg of beef per capita (down from 30.7kg in 2014). Offsetting domestic beef consumption trends is the unprecedented international demand in recent years.

MLA’s domestic marketing campaigns maintain the strong consumer preference for beef and lamb in order to sustain a willingness to pay a premium over alternative proteins.

The tactical approach behind the “You’re better on Beef” campaign is underpinned by consumer insights, choice and a focus on highlighting the nutritional value of beef -  reinforcing beef’s superior nutrition composition, with 13 essential nutrients including protein, iron and zinc as an essential part of healthy balanced Australian family meals.

While beef’s nutritional makeup will remain the key focus of targeted consumer marketing campaigns for the foreseeable future, it is worth also recognising there is the opportunity to reinforce our Australian provenance.

Ben Thomas – Manager, Market Information

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