In mid-February 2023 we published our revised Beef Processor Profitability Index (BPPI) which showed that as of January 2023 the situation for Aussie beef processors was improving but the indicator was still in the negatives at a measure of -0.26. Some slight adjustments to beef export pricing saw the January outcome revised slightly better to -0.19*.
Falling domestic cattle prices and relatively strong beef export pricing offshore have continued to favour local beef processing operations over the first quarter of 2023. February 2023 saw the BPPI improve again to -0.08 and March saw the profitability index move back into the positives for the first time since early 2020.
The BPPI for March 2023 sits at 0.27 which is the highest it has been since January 2020. On a seasonal basis the BPPI has moved above the average seasonal trend as the long term March average, according to the average seasonal pattern is an indicator of 0.07. Historically, according to the average pattern, beef processing margins improve slightly as we head toward May before times get a little tougher during winter with margins often narrowing to their seasonal lows, so there may be more hiccups yet for beef processing before the year is through.
Please note this processor index is based upon a theoretical processor margin model and is purely representative of the Australian beef processing sector. A BPPI in negative territory does not suggest that all processors are losing money, similarly a BPPI in positive territory doesn’t suggest that all processors are making money. A more useful reading of the BPPI would be that a negative index suggests a tougher processor trading environment, versus a positive BPPI which is reflective of a more beneficial processor trading environment.
* Please Note – Occasionally, as was the case for January 2023, the data this model relies upon is updated after publication so there can be slight revisions to previously reported monthly BPPI figures.