Market Morsel: Groundhog year for beef processors

Market Morsel

It is a case of swings and roundabouts for Australian beef processors over the last few months with some factors going in their favour and others going against them, according to the EP3 processor model. The annual average loss for 2022 sits at $319 per head and the trend so far this year is closely matching the pattern set in 2021.

After hitting a loss per head of $321 in March the processor model has seen margin losses narrow toward $300 per head in April and May. Cattle prices in Australia have begun to creep higher, reflecting higher input costs for processors, but some strong gains in beef export prices (particularly in the USA) have helped offset the higher cattle costs. Average co-product and offal prices have lifted about 2% over May helping to add revenues to processor bottom lines, but the release of the ABS electricity and wages cost index for the first quarter of 2022 shows power costs are up 5% and manufacturing sector wages have grown by 2%.

Labour issues have been a particularly challenging factor for meat processors across the country this season and the situation shows little sign of improving soon. Trained staff are in limited supply, Covid continues to be a threat to productivity (particularly in WA) and the current scheme of bringing in foreign workers is costly and ineffective. Bearing in mind most processors are running at 50%-60% capacity presently, it begs the question how processing throughput can increase as the flock/herd increases with such a bottle neck on labour in the meat processing plants.