A RECENT family holiday to the US turned into a research trip for AgForce Cattle president and Mitchell producer Grant Maudsley, when he took a closer look at the challenges and opportunities presented by the second largest market for Australian beef.
Never one to sit back and just enjoy the view, Mr Maudsley admits he had his "beef producer hat" firmly on his head during the 35-day trip across America.
"I certainly took every opportunity to 'value-add' to the trip and learn all I could about the dynamics of the beef supply chain," Mr Maudsley said.
"The US is the second largest market for Australian beef, taking 251,478 tonnes shipped weight in calendar year 2009, worth A$1,029,506.
"The Australian and US beef supply chains and marketplace could not be more different, yet the characteristics of the US industry combined with consumer trends create marketing opportunities for Australian producers.
"The US grainfed beef market has its fair share of emerging challenges due to its reliance on grain," Mr Maudsley said.
"The whole industry is underpinned by a reliable supply of corn, although 25 percent of the US corn harvest is now redirected to biofuel under the auspices of an energy bill aimed at reducing reliance on foreign oil reserves. Despite historically reliable inputs, the US cow herd is in decline from 33 million to 31 million head, and as a result, short-term price spikes for feed-on cattle are inevitable."
Mr Maudsley said Australia's island status does present significant transport and logistics cost pressures.
"More than 90pc of US beef is consumed domestically, and their major export markets are just across the border to Canada and Mexico. On the other hand, importing Australian beef to the US brings freight costs of up to 60c/kg ($180/head). The only advantage is that ageing the beef for 40 days in a container improves quality."
Currency would normally give some form of relief, but given the dollar has averaged 88c for 2009/10, and during six months of this period averaged above 90c, there has been little reprieve.
When Australian beef arrives on the US doorstep, it must compete in a marketplace saturated by cheaper protein options.
"Americans eat 50.3kg of poultry and 29.3kg of pork per annum, compared to eating 39.7kg of beef - a major percentage of which is ground meat. The average retail price for poultry is A$4.52/kg, for pork it is A$7.55/kg, and for beef it is A$11.55/kg (using 85c exchange rate)."
In one warehouse-style outlet, Mr Maudsley found pork loins selling for the same price as ground beef at A$5.15, alongside USDA prime New York striploin at A$28.50/kg.
"For a society still reeling from the economic impacts of the recession, price and value are the main purchasing considerations for US consumers," Mr Maudsley said.
"But the good news is that a forecasted population growth of 30 million every 10 years creates market opportunities for both US and Australian producers - even in niche markets.
"The Hispanic influence on consumer trends is also critical to market growth - 45 million Mexicans in the US are vigorous beef eaters and have historic and current influences on diet and menu offerings.
"Feeding 307 million people from all nationalities requires diversity of choice and food styles. Even hamburger-style restaurants compete fiercely to attract consumers, and there is strong competition at a retail level for secondary cut innovation and value-adding.
"Australia's grass-fed beef industry is especially well positioned to take advantage of the increasing awareness and growth at a retail level and to position itself as a complementary conten-der in a competitive protein market.
"Australia's clean, green reputation, backed by the image of grass-fed beef, is paramount to our competitiveness in a US market where grainfed beef is the generic and dominant product. Cattle Council of Australia's pursuit of a grass-fed standard, led by AgForce, will provide a point of difference for Australian beef when underpinned by MSA, creating opportunities to slide right onto existing menus. While the USDA system of grading only relates to a carcase and ignores variability of cuts, MSA remains the only accurate predictor of eating quality on a cut by cooking method basis.
"When positioned with other Australian products, it will allow US consumers to purchase MSA-graded beef (EQA on the export market) of predictable eating quality. Australia will become a more reliable supplier as more processors grade MSA, with a 20pc growth in MSA grading figures recorded domestically last year."
Mr Maudsley said a 2009 Beef Consumers report by Technomics (US) found 36 per cent of consumers were willing to pay more money for grass-fed beef.
Another market researcher, Information Resources, also found the popularity of natural and organic products was increasing despite a recessionary economy.
"The beef marketplace in the US is saturated with competition and price-point differentiation, so secondary cut innovation and niche marketing in this massive economy offers possibilities for positioning Australian product at all price levels.
"The US has highly efficient and specific animal production systems backed by a highly geared processing sector, so Australian producers will never compete on price alone.
"To remain competitive in the face of high freight costs and a beef system underpinned by reliable input supplies and economy of scale, we must leverage on differentiation and innovation to become 'margin makers' rather than price takers."
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