How are global and Australian
beef producers performing?
Global agri benchmark network results 2016
Written by Karl Behrendt (Charles Sturt University)
and Peter Weeks (Weeks Consulting Services)
Commissioned by Meat & Livestock Australia
January 2017
MLA Market Information Report – How are global and Australian beef producers performing?
Contents
Highlights – Beef cattle ......................................................1
Introduction .........................................................................1
What is agri benchmark?....................................................1
Global price and cost trends ............................................. 4
Food and meat prices ................................................................. 4
Global cattle price trends ........................................................... 4
Cattle price forecasts......................................................... 5
Changes in projections ............................................................... 5
OECD-FAO demand and price projections .............................. 5
USDA price forecasts .................................................................. 6
Grain prices ......................................................................... 7
Global meat supply ............................................................ 8
World beef supply .............................................................. 9
Beef consumption ............................................................ 10
Beef trade .......................................................................... 11
Global performance of beef farms .................................. 11
Pasture-based beef farm profitability .............................13
How efficient are Australian beef producers? ...............14
Cow-calf enterprises ..................................................................14
Stocking rates of cow-calf enterprises .............................................................14
Weaning rates (calves per 100 cows) ...............................................................14
Total live weight produced per cow ..................................................................14
Weaner and cull cow prices ................................................................................14
Total cow-calf returns ............................................................................................15
Total cost of cow-calf production .......................................................................15
Labour costs and productivity ............................................................................15
Total costs, returns and profitability of cow-calf production in 2014 ........16
In comparison… Australian cow-calf systems have: ..............16
Cattle finishing enterprises ...................................................... 17
Liveweight at start and weight at end of finishing phase............................17
Daily and net weight gain ....................................................................................17
Comparison of beef prices from 2012 to 2015...............................................18
Costs of finishing ....................................................................................................18
Total costs and farm rankings .............................................................................19
Finishing costs, returns and profitability ..........................................................19
In comparison… Australian beef finishing systems have: ....20
Signs of new investment in beef farms ..........................21
Market Information
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Page i – Global agri benchmark network results 2016 – BEEF
MLA Market Information Report – How are global and Australian beef producers performing?
Highlights
Beef cattle
• Global beef prices were generally on the decline into 2015 in USD terms, but rose in local currency terms, which
highlights the effect of a rising USD.
• In 2015, Australian cattle prices rose appreciably, partly catching up on earlier global price rises, following the impact
of the prolonged 2012-2014 drought (cattle oversupply) and a high A$.
• Few countries can boast long-term profitability in beef production at present, though higher beef prices improved
results for Australian farms in 2015, whereas globally, profitability fell marginally for most countries.
• This, together with continued climate volatility (especially drought) and growing resource and environmental
constraints, suggests that global beef supply response will be moderate, and are unlikely to lead to a major beef
price over-correction (as earlier global cattle production and price cycles have).
• While cow-calf enterprises were generally profitable in 2015, cattle finishing was not, although it had improved from
2014 levels.
• Typical Australian beef farms achieved the highest levels of profitability since 2006 and were mostly profitable on
both a short- and medium-term basis in 2015, but only two of the eight systems being monitored were profitable in
the long-term – given Australia’s relatively high opportunity costs of land and labour.
• Australia has moderate to low calf weaning rates and cow herd productivity, compared with similar systems.
• Australia achieves moderate-to-high weight gains in southern farming systems, but low gains in extensive northern
systems.
• Overall, Australia remains an efficient beef producer, with a moderate to low cost of production.
Introduction
This report presents the agri benchmark network’s perspectives on recent global beef developments, the economics and
drivers facing producers around the world, farm profitability (globally and in network countries) and views on likely future
developments and challenges.
It then asks the question ‘how competitive are Australian beef producers and what are the main areas where our
productivity differs from other countries?’
The analysis and perspectives are as of mid-2016, though farm data is for the 2015 year.
What is agri benchmark?
1
agri benchmark is a global, non-profit and non-political network of agricultural economists, advisors, producers and
specialists in key sectors of agricultural value chains. The cattle network has over 30 member countries, covering 90% of
world beef production and has been producing the results of comparative analysis over the last 13 years.
The core competence of the network is in analysing production systems, their economics, drivers and perspectives.
agri benchmark aims to assist:
• producers and their organisations to better align future production through analysis of comparative performance and
positioning;
• non-profit organisations (governments, NGOs, international organisations) to monitor global agricultural challenges;
and
• agri-businesses to operate successfully through in-depth understanding of markets and customers.
agri benchmark has branches covering beef cattle and sheep, dairy, pigs, cash crops, horticulture and organic farming.
Within cattle, it covers breeding and finishing enterprises (cattle cow-calf, cattle finishing). It is also unique in being able
to separately measure the performance of the breeding and finishing operations even on joint breeding/finishing farms.
Furthermore, it measures beef enterprise performance separately from (and together with) other outputs where the
enterprise is diversified (in southern Australia typically with some cropping and/or sheep).
1 See http://www.agribenchmark.org/home.html
Global agri benchmark network results 2016 – BEEF – Page 1
MLA Market Information Report – How are global and Australian beef producers performing?
Figure 1: Countries in the agri benchmark beef and sheep network
2016
Countries
Farms
Cow-calf
27
66
Beef
finishing
32
83
Sheep
18
38
Countries with beef and sheep farm data
Countries with beef data only
Countries with sheep data only
The farm-level results in this report are drawn from the collection of ‘typical farm’ data in each country, and subsequent
analysis and research efforts of all member countries culminating in the 14th annual agri benchmark conference in
Córdoba, Spain, 8-16 June 2016.
‘Typical farms’ are farms ‘engineered’ by local producers and experts to be typical of a country’s main cattle production
systems, using annual data drawn from farms in the key production regions. In Australia data was collected for eight
typical beef farms in Queensland, the Northern Territory, NSW and Victoria.
Table 1: Australian agri benchmark typical cattle farms
Held/Sold
(Cows/Steers)
Farm make-up
AU 65/180
(180 Cows held/65 steers sold) – northern tablelands NSW; Angus + sheep + wool;
pasture feed base
AU 85/200
southern tablelands NSW; British breed; pasture feed base
AU 150/350
western districts Vic.; Angus; pasture, hay, oaten grain feed based
AU 280/750
central Qld; Bos Indicus; pasture, mineral supplements feed base
AU 310/520
south east Qld; Simmental X Droughtmaster; cattle + crops; pasture feed base
AU 360/1550
Northern Territory, Bos indicus; live export; pasture, mineral supplements feed base
AU 450/500
northern slopes NSW; Charolais X Angus; pasture, hay, sorghum feed base
AU 930/2500
central Qld, Bos indicus; cattle + crops; pasture, oats grazing feed base
Page 2 – Global agri benchmark network results 2016 – BEEF
MLA Market Information Report – How are global and Australian beef producers performing?
Figure 2: Location of Australian typical cattle farms and beef cattle density
AU-360/AU-1550
DARWIN
AU-280/AU-750
AU-930/AU-2500
AU-310/AU-520
BRISBANE
AU-65/AU-180
PERTH
SYDNEY
AU-450/AU-500
CANBERRA
ADELAIDE
Legend - cattle per sq km
>51
MELBOURNE
31 - 50
11 - 30
3 - 10
0-2
AU-150/AU-350
N
0
250
500
750
AU-85/AU-200
1,000
Kilometres
HOBART
Australia
IMAGE HERE?
Global agri benchmark network results 2016 – BEEF – Page 3
MLA Market Information Report – How are global and Australian beef producers performing?
Global price and cost trends
Food and meat prices
98
96
19
19
19
04
02
00
08
06
20
20
20
14
16
20
20
20
20
20
20
12
10
20
14
94
92
19
12
90
19
Source: FAO
10
0
Figure 4: FAO global meat price indicies
(based on USD prices)
250
Price indices (2002-2004 = 100)
Meat price index
Bovine meat
200
Poultry meat
Ovine meat
Pig meat
150
100
50
16
20
20
08
20
06
20
04
20
02
20
98
00
20
20
96
19
19
19
94
92
0
Source: FAO
Figure 5: Currency changes against the USD
10
% change
2014
2015
0
-10
-20
-30
-40
-50
Uruguay
Uruguay
UK
Ukraine
Tunisia
Switzerland
Spain
Sweden
South Africa
Russia
Poland
Peru
Paraguay
Namibia
New Zealand
Mexico
Italy
Source: www.oanda.com
Kazakhstan
Ireland
Indonesia
France
Germany
Czechia
Columbia
Brazil
-70
China
-60
Ukraine
Apart from the Ukraine, Australia had the largest rise in
cattle sale prices in local currency terms in 2015 followed
by South American countries, New Zealand, Russia and
Canada, but with only small rises in European countries.
The only countries to suffer a (small) fall in prices in
local currency terms were China and the UK, as their
currencies rose against the USD.
50
Canada
The largest currency devaluations in 2014 and 2015 (see
Figure 6) were in South American countries, Russia and
the Ukraine, while China and the UK did not devalue
against the USD over the two year period.
Food
100
Austria
Globally, cattle prices fell significantly in 2015 in USD
terms, but rose in local currency terms in most countries,
reflecting the substantial rise in the USD during that
year (see Figure 5). This needs to be kept in mind when
interpreting the agri benchmark farm results for 2015, as
the base currency used is USD.
Dairy
150
Botswana
Global cattle price trends
Cereals
200
90
The 23% decline in global meat prices (in USD) since
2014 (first eight months of 2016) has been led by pig
meat and sheep meat with 28% declines, followed by
poultry 23% and beef 18%.
Meat
250
19
With the falls in grain costs commencing in 2012, and
subsequent falls in other costs, led by fuel, fertiliser and
interest, plus a sharp rise in the USD, meat prices began
to decline significantly in 2015 (in USD terms), with further
falls in 2016.
Price indices (2002-2004 = 100)
Australia
Even after the fall from 2011 to 2016, food prices remain
50% higher than prior to 2004.
300
19
Food prices peaked in 2011, corresponding to the high
in cereal prices, with dairy product and meat price peaks
typically lagged by 2-3 years (as livestock production
takes time to adjust to changes in grain input costs) –
peaking in 2013 and 2014, respectively.
Figure 3: FAO global food price indicies
(based on USD prices)
Argentina
Global food prices in USD doubled in the 10 years to 2011,
but have been highly volatile over the past 15 years (see
Figure 3). Currency volatility, especially the USD, has
played a significant part in this, as has fluctuating crop
harvests (and inventories) and growth in food demand
and imports in developing countries, led by China.
Figure 6: Cattle sale price movements in 2015 in agri
benchmark countries
60
% change
National currency beef
USD beef
50
40
30
20
10
0
-10
Page 4 – Global agri benchmark network results 2016 – BEEF
UK
Tunisia
Switzerland
Spain
Sweden
Russia
South Africa
Peru
Poland
Paraguay
Mexico
New Zealand
Source: agri benchmark Result Data Base
Namibia
Italy
Kazakhstan
Germany
Indonesia
France
Columbia
China
Canada
Brazil
Austria
Australia
-30
Argentina
-20
MLA Market Information Report – How are global and Australian beef producers performing?
Cattle price forecasts
Changes in projections
• The past year marks a significant short- to medium-term turning point in cattle production and price trends. The
previous decade featured a tightening demand/supply situation – attributed essentially to the industrialisation and
urbanisation in the mass population countries of China, India and Indonesia and trade liberalisation (especially
by China). The supply response to the high beef prices, low grain costs and resultant high cattle profitability has
been quicker than previously anticipated, commencing in 2015 in North America and soon to be followed by
South American suppliers.
• Hence, both USDA and OECD-FAO have significantly lowered their projected global and US prices for the next 10
years from what they had in 2015 – basically lowering price forecasts by 10%-20% (in USD terms).
• Also, while OECD-FAO has kept the pattern of a fall in prices initially followed by a partial recovery, USDA has
changed to an ongoing fall levelling off by 2025 but not recovering.
• Both the USDA and OECD-FAO give the main price drivers as low grain prices and beef supply build-up, especially
in the US. However, it is not clear why USDA still have prices in decline beyond 2020, when supply build-up has
virtually ended by then (with little change to their chicken and pig meat production forecasts).
• Cattle prices over the 2016-2025 period are still projected to be much higher than those in the previous decade.
• In the longer-term (beyond 2020) the latest cyclical growth in beef and meat production will have ended,
allowing the underlying positives – growing middle class demand in China and elsewhere in Asia, liberalisation
in trade access (especially to China, Japan and Korea) and growing production constraints from limited resources
(especially land), environmental restriction and climate change – to restore a steady rise in nominal prices.
OECD-FAO demand and price projections
• The latest OECD-FAO projections for the 2016-2025 period2 (released in July 2016) states that “Meat prices fell in
2015 from recent record levels, in both nominal and real terms. During the projection period, prices will in general
increase slightly in nominal terms due to slow economic growth, and trend moderately downwards in real terms,
though the actual path will differ depending on the type of meat. Nominal bovine meat prices will decline until
2020 in line with an expansion of output in key producing areas of the world. In the period that follows, however,
increases in feed costs will slow down production growth, putting upward pressure on beef prices.” (Meat section,
page 1)
• While the new OECD-FAO projections still have beef prices consolidating at a level well above prices prior to
2010, beef prices start from a peak in 2014 that is 2-3 years earlier and 18% higher than previously expected (see
Figure 7).
• Consequently, the price decline is also much larger, falling 25% between 2014 and 2019 (instead of only 6%
predicted previously) before gradually rising again. This represents a fall of 17% from forecast 2016 levels.
• These price projections are around 10% lower than previously expected, due to the lower grain prices and more
rapid response in global beef supplies.
Figure 7: OECD FAO Beef price projections 2016-2025
USD/tonne cwt
6000
World beef prices
5000
Forecast July 2016
Argentina
Forecast July 2015
4000
3000
2000
1000
19
7
19 1
7
19 3
75
19
7
19 7
79
19
8
19 1
8
19 3
8
19 5
8
19 9
9
19 1
9
19 3
9
19 5
9
19 7
9
20 9
0
20 1
0
20 3
05
20
0
20 7
0
20 9
1
20 1
1
20 3
1
20 5
1
20 7
1
20 9
21
20
2
20 3
25
0
Source: OECD FAO Agricultural Projections Database
2 OECD FAO Agricultural Outlook 2016-2025, http://www.oecd.org/publications/oecd-fao-agricultural-outlook-19991142.htm
Global agri benchmark network results 2016 – BEEF – Page 5
MLA Market Information Report – How are global and Australian beef producers performing?
USDA price forecasts
• This major downward revision to the global projected prices by OECD-FAO largely mirrors those in the latest
USDA cattle price projections to 2025 (see Figure 8).
• Following the 2014 global beef price spike and relatively low grain prices, competition is starting to build from
both the US and Brazil. US cattle and beef prices fell appreciably in 2015 and 2016, leading to falls in US cuts
prices to Japan and Korea.
• Consequently, the US long-term projections (USDA) have changed markedly in the past year, though the
underlying story remains the same – rising herd and beef production and falling cattle prices, with prices
remaining at a much higher level than pre-2010.
However, the new expected price plateau in the US is significantly lower than projected previously (see Figure 9). USDA
is now projecting an 8% expansion in the US cattle herd between 2016 and 2025, 13% growth in beef production and an
18% fall in fed cattle prices (14% below 2016 forecast levels).
US beef production is already rising, two years earlier than anticipated (was previously expected to reach a low in 2017),
and is now forecast to be 12% higher than previously forecast by 2017 and 2018 and 6% in 2024. Hence, forecast cattle
prices are much lower – not surprised in short-term, but by 2023 production is only 6% up on previous forecast but
price forecasts have been adjusted 20% down.
Figure 8: USDA livestock production and price projections
Nominal US livestock prices
US red meat and poultry production
USD/hundred weight
160
Beef cattle: Steers, 5-area
140
Broilers: National composite
120
Hogs: National base
100
Billion pounds
45
Beef
40
Broilers
35
Pork
30
80
25
60
20
40
15
20
10
90
19
95
19
00
20
05
20
10
20
Source: USDA long-term projections, February 2016
United States
15
20
20
20
25
20
95
90
05
00
19
19
15
10
25
20
20
20
20
20
20
20
Figure 9: USDA change to production and price projections
2016-2024 production forecasts up 9% on average/price forecasts down 19%
Beef production forecast 2015
Fed cattle price forecast 2015
Beef production forecast 2016
Fed cattle price forecast 2016
million tonnes cwt
14
US¢/kg lwt
400
350
12
300
10
250
6
200
150
4
100
2
50
0
14
20
15
20
16
20
17
20
18
20
19
20
20
20
Source: USDA Long-Term Projections, February 2016
Page 6 – Global agri benchmark network results 2016 – BEEF
21
20
22
20
23
20
24
20
25
20
0
MLA Market Information Report – How are global and Australian beef producers performing?
Grain prices
• Global grain prices have fallen further than
expected in the past 2-3 years, including a 30%
decline in wheat prices and 44% in maize prices.
This completes a most volatile decade and takes
crop prices back to levels a decade earlier but still
50-60% above the more stable levels in the 19902005 period.
• Main reasons for the latest declines are abundant
supplies (including a record global harvest in 2014),
slower demand growth, large grain stocks, lower oil
prices and a strong USD.
• OECD-FAO is projecting crop prices to remain
under pressure in the short-term due to a
continuation of sluggish world economic growth,
large grain stocks, low oil prices and a strong USD.
Prices are projected to rise in nominal terms, but
decline in real terms in the medium- to long-term,
leaving prices well below the past decade but
over 50% higher than in the preceding 1990-2005
period.
• The sharp beef price rise in the 2012 to 2014
period and falling grain costs helped to lift the
beef-to-grain price ratio considerably, enhancing
the profitability of cattle finishing and enticing herd
rebuilding.
Figure 10: OECD-FAO grain indicies
FAO world grain price (USD/tonne)
400
350
300
250
200
150
100
50
0
Wheat
Wheat forecast
1
99
93
19
1
19
95
19
97
Maize
Maize forecast
1
00
99
19
03
20
2
05
20
20
07
20
09
1
01
2
Other coarse grains
Other coarse grains forecast
13 015 017 019 021 23 25
2
2 20 20
2
2
20
Source: OECD-FAO grain indicies
Figure 11: OECD-FAO beef to grain price ratio
FAO world beef price/world grain price
25
20
15
10
5
Beef/wheat
Beef/wheat forecast
0
19
91
19
93 995 997 999 0
1
1
1
2
01
Beef/maize
Beef/maize forecast
1
1
03 005 007 009 01 013 015 017 019 02 023 025
2 2
2
2 2
2
2
2
2
2
2
20
Source: OECD-FAO grain indicies
• The subsequent fall in beef prices in 2015 was
large enough to drop the beef to maize price ratio
back towards average levels recorded over the
past 15 years.
Ireland
Global agri benchmark network results 2016 – BEEF – Page 7
MLA Market Information Report – How are global and Australian beef producers performing?
Global meat supply
• Global meat production growth continues to slow, constrained by tightening land, water and feed constraints plus
environmental, food safety and animal welfare considerations. Meat production is only expected to expand by 14%
in the coming 10 years (to 2025), down from 22% and 25% in the previous two decades (2005 to 2015 and 1995 to
2005, respectively) (OECD-FAO, July 2016).
• In a major turnaround, the fastest growth in the next 10 years is expected to be in sheep meat and beef.
– With the recent boost in sheep profitability and continuing growth in demand, sheep meat production is forecast
to expand 22% in the next 10 years, above the 15% and 20% increases in the preceding 10-year periods,
respectively – the fastest percentage production rise of all the meats.
– High beef profits and lower grain prices also sees beef production predicted to rise 15%, up from 8% and 12%, in
the preceding two 10-year periods, respectively.
– Growing productivity and environmental constraints are expected to lower poultry production growth to 16%
(from 37% and 48% in the preceding two decades) and pig meat to 11% (from 19% and 20% in the preceding
decades).
• Hence, the share of beef in total meat production is expected to remain at the 2015 level of 22% in 2025, and
sheep meat grow slightly from 4.8% to 5.1% (still relatively small).
• Hence, red meats are predicted to account for a large 29% of total global meat supply growth in the next 10 years
(up from 17% and 12% in the preceding decades), still behind pig meat with 30% and poultry with 41%.
Figure 12: Growth in world meat production
1995-2005
2005-2015
Meat growth 52mt 25%
2015-2025
Meat growth 56mt 22%
Meat growth 44.6mt 14%
Beef
Beef
Beef
Pigmeat
Pigmeat
Pigmeat
Poultry
Poultry
Poultry
Sheepmeat
Sheepmeat
Sheepmeat
Source: OECD-FAO Agricultural Outlook Database July 2016
South Africa
Page 8 – Global agri benchmark network results 2016 – BEEF
MLA Market Information Report – How are global and Australian beef producers performing?
World beef supply
• The major change in the agri benchmark conference in 2016 was on the supply side, with a combination of high
beef and sheep meat prices (in local currency terms), contained costs, especially for grains and fuel, a boost to
industry programs and easing import restrictions in a number of key countries suggesting a likelihood of faster
growth in global beef and sheep meat supplies in coming years. This was particularly the case for the US, Russia,
China, Mexico, Brazil and Argentina.
Table 2: OECD-FAO forecast meat production growth
Beef
(cwe)
Pigmeat
(cwe)
Poultry meat
(rtc)
Sheepmeat
(cwe)
Total meats
2025 on 2015 change ‘000 tonnes
9,966
13,263
18,274
3,100
44,604
% change
Share of growth
2015 on 2005 change ‘000 tonnes
15%
22%
11%
30%
16%
41%
22%
7%
14%
5,266
18,514
30,318
1,898
55,996
% change
Share of growth
2005 on 1995 change ‘000 tonnes
% change
8%
9%
6,526
19%
33%
16,420
37%
54%
26,932
15%
3%
2,080
22%
51,958
12%
20%
48%
20%
25%
Share of growth
Meat share 1995
Meat share 2005
Meat share 2015
Meat share 2025
13%
27%
24%
22%
22%
32%
40%
39%
38%
37%
52%
27%
32%
36%
37%
4%
5.1%
4.8%
4.6%
4.9%
100%
100%
100%
100%
Source: OECD-FAO Agricultural Outlook Database 2016-2025
• This is backed up by the latest OECD-FAO projections, with a prediction of 15% growth in beef supplies in the
next 10 years (to 2025), up from 8% in the last decade (2005-2015) and 12% in the previous one (1995-2005).
Developing countries are again expected to contribute the dominant share of growth in beef supplies, up 7.7
million tonnes or 20% (after a 17% growth in the 2005-2015 period and 34% growth in the decade before).
• The main growth in developing countries is expected to be in Latin America (up 18% compared with only 5% in the
preceding 10-year period), mainly in Brazil, despite the expectation of continued political and economic turmoil.
In addition, the recent lifting of the export bans and other reforms in Argentina are expected to see its production
recover by 32% after falling 14% in the previous 10 years.
• Asia is the other developing region to contribute substantially to beef supply growth in the coming 10 years – with
China’s renewed support for the industry resulting in a rise of 22%, similar to the preceding decade, and India up
30% (compared with a 14% rise in the 2005-2015 period and 6% in the preceding 10 years).
• However, the main production shift is in developed countries, which are also expected to register beef supply
growth in the next 10 years – of 2.26 million tonnes or 8%, compared with falls of 1% in the 2005-2015 period and
6% in 1995-2005. The majority of this growth is expected to be in the US of 18% (compared with a fall of 6% in the
2005-2015 period), with some growth also in Mexico and Australia.
• The recent huge government investment in the industry in Russia is expected to result in a 6% growth in beef
production, compared with an 8% decline in the previous 10 years and a fall of 34% in the 1995-2005 period.
• Notably, EU beef production is predicted to decline 4%, similar to the fall in the preceding 10 year period (with
a 13% fall in the 1995-2005 period). Recent research by agri benchmark and the contributions from the many
EU countries represented at the 2016 Conference indicates that recent CAP reforms are likely to reduce beef
production further.
• The Conference again highlighted the negative impact of recent widespread severe weather conditions (climate
change?), especially in South America, Australia and South Africa. The repeat of such conditions in the next
decade could see beef production growth much lower than predicted by the OECD-FAO.
Global agri benchmark network results 2016 – BEEF – Page 9
MLA Market Information Report – How are global and Australian beef producers performing?
• Other challenges for beef supply raised at the 2016
agri benchmark Conference included:
–– Methane emissions
Figure 13: Forecast beef production growth 2016-2025
Growth ‘000 tonnes cwt
2,000
% change
60
–– Water use
1,500
45
–– Low feed conversion rates
1,000
30
500
15
–– Land use changes
–– Animal welfare
0
0
Beef consumption change
-500
S
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zi
a
Br
% change
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a M do N Et C
u Z ia
ge
an
r
P
A
s
T
n
I
A
s
Ru
-15
i
Ch
Source: OECD-FAO Agricultural Outlook Database 2016-2025
Beef consumption
• Recent high prices for both beef and sheep meat, especially relative to pork and poultry, has seen beef and
sheep meat consumption decline in almost all developed countries, while consumption continues to rise in many
developing countries of Asia and the Middle East.
• World beef consumption per person declined 2% in the last 10 years (following a 3% fall in the preceding decade
(1995-2005). The falls in the last 2-3 years have been concentrated in the North America, Latin America, Oceania
and Russia, partially offset by rises in Asia, North Africa and Turkey.
• Beef consumption per person in developed countries fell 10% in the last 10 years following a 5% fall in the
previous 10 years. Major declines were seen in the US (-18%), Europe (-10%), Australia (-16%) and New Zealand
(-8%).
• In addition to production falls following reductions in CAP assistance, European countries report negative impacts
of health concerns (carcinogenic research claims), vegetarian/flexitarian trends and laboratory meat substitutes as
impacting negatively on beef consumption.
• In contrast, beef consumption in developing countries rose 9% in the last 10 years, led by Asia – with rises of
28% in China, 6% in Japan, 58% in South Korea, 48% in Indonesia and 295% in Vietnam. All these Asian countries
benefited from rising underlying food demand (except Japan) and an easing in import barriers over the 10 years.
• The Middle East also saw large consumption rises, such as a 34% jump in per person consumption in Saudi Arabia
and 145% in Turkey – again a combination of population and income driven demand rise and market liberalisation.
• Some developing regions did not see growth in per person consumption, particularly Latin America (down 1% with
a 5% fall in Argentina due to government policies) and Sub Sahara Africa (down 6%).
• Beef consumption also declined 5% in Russia, with government restricting imports and 53% in India as carabeef
was diverted to export markets.
• With lower beef prices and increased production growth expected in the coming decade, beef consumption
per person is predicted by OECD-FAO to rise by 4% worldwide. Developed countries are expected to average
consumption growth of 4% and developing countries of 7%.
• The big percentage rises are forecast to be in Asia (13% overall with 21% in China, 25% in India, 31% in Indonesia
and 17% in Vietnam). With the ongoing reductions in tariffs, beef consumption in South Korea is forecast to
rise 12% and Japan by 4%. Modest rises are also forecast for the US (4%) and Latin America (3%), but with no
significant rise in Mexico or Europe.
• However, given ongoing (if slower) population
growth, the big consumption countries of China,
the US and Brazil along with regions of Africa,
other Asia and other Latin America are expected to
dominate total beef consumption growth over the
next 10 years (see Figure 14).
Forecast world consumption growth = 10mt or 15%
Growth ‘000 tonnes cwt
2,500
% change
50
2,000
40
1,500
30
1,000
20
500
10
0
Beef consumption change
-500
il
0
% change
ia na pt co ea lia an 8 ca ia
an m ia
st na Ind nes nti Egy exi or tra ap U-2 Afri r As
ki iet
K us
J E
o ge
e
M
d
r
Pa V
A
th
In A
O
Source: OECD-FAO Agricultural Outlook Database 2016-2025
a
in
Ch
S
U
az
Br
Page 10 – Global agri benchmark network results 2016 – BEEF
th
A er L
m a
er tin
ic
a
• Of this beef consumption growth, 70% is forecast to
occur in Asia, Africa, the US and Brazil.
Figure 14: Forecast beef consumption growth
O
• In total, beef consumption is forecast to grow by
10mt or 15% in the coming 10 years, up from 10% in
both the 2005-2015 and 1995-2005 periods.
er
th
O
-10
MLA Market Information Report – How are global and Australian beef producers performing?
Beef trade
• World beef trade continues to expand, driven by growing demand and the lowering of import barriers in Asia.
The OECD-FAO forecasts a further 2.2 million tonne, or 21% growth, in world beef imports in the coming 10 years,
compared with 3.3 million tonnes (44%) and 1.3 million tonnes (21%) in the previous two 10 year periods.
• Again the beef import growth is expected to be mainly in Asia, especially to Vietnam (311kt or 39% growth), China
(260kt or 46%), Indonesia (150kt or 79% growth) and South Korea (73kt or 20% assisted by falling import tariffs).
• Africa is also expected to be a growing market, with a 600kt expansion or 60% (up from 370kt and 100kt in the
previous two 10 year periods).
• Notably, the US market is not forecast to expand
significantly (up only 3% or 56kt), and nor is Japan
(up 1% or 7kt).
• Beef export growth is expected to come principally
from Brazil (up 823kt or 39%), the US (up 700kt or
68%), Argentina (up 616kt or 280% following the
recent lifting of export bans and other industry
restrictions) and India (up 317kt or 15%).
• In contrast, Australia’s exports are predicted to
rise by only 34kt in the next 10 years or 2% (after
rising 490kt and 255kt in the previous two 10 year
periods).
Figure 15: Forecast growth in beef exports 2015 to 2025
Forecast world export growth = 630kt or 12%
Growth ‘000 tonnes cwt
1,200
% change
300
Beef export change
1,000
% change
250
800
200
600
150
400
100
200
50
0
0
-200
-50
-400
l
zi
S
na
ia
co
lia
da
nd
ey
nd
ne
ay
ay
an
na
ca
8
i
i
t
-2
k
u
u
ri
a
a
al Tur ail kra rug rag kis Ch Af EU
h
U U
Pa
Th
Pa
ut
w
o
e
S
N
Source: OECD-FAO Agricultural Outlook Database 2016-2025
a
Br
U
ti
en
g
Ar
d
In
i
ex
M
ra
st
Au
na
Ca
Ze
-100
Global performance of beef farms
Few countries can boast long-term profitability on cattle enterprises at present, even though beef prices rose to record
highs during the 2013-2014 period, with recent global falls reducing the price closer to median long-term trends. Even
when net profit from other sources or enterprises on the same farm (such as from crops, sheep, wool etc) are counted
to yield a whole farm profit3, only some beef farms in Australia, Argentina, Uruguay, China, Kazakhstan, Ukraine and
Indonesia made a profit, without government payments, in 2015. This represents a year-on-year improvement since
2012. European beef farms tended to make medium- and long-term losses, which become significantly more severe with
the exclusion of government payments. Results were mixed in Australia, Brazil, Argentina, and Colombia.
While cow-calf enterprises have generally been profitable in most countries, beef cattle finishing has not been a
profitable business over recent years due to the high cost of weaners and feed.
Colombia
3 Whole farm profit refers to the combined returns from all enterprises undertaken on the farm, including for example, cropping or sheep,
net of the costs of operation. Beef farm enterprise returns refers to returns attributed to the beef cattle component of a farm. Similarly,
beef cow-calf enterprise returns and beef finishing enterprise returns refer to returns specifically attributed to the beef cow-calf and beef
finishing components of the farm (calculated separately, even when combined on the same farm, such as occurs in the typical Australian
pasture farms).
Global agri benchmark network results 2016 – BEEF – Page 11
MLA Market Information Report – How are global and Australian beef producers performing?
Figure 16: Projected 10-year beef import growth from OECD-FAO (2015 to 2025)
Total beef import growth = 2.2mt or 21%
Legend
5%
Denotes >200kt growth (%)
5%
Denotes 100 to 200kt growth (%)
5%
Denotes > 50 to 100ktgrowth (%)
Denotes 50 to -30kt growth
5%
Denotes > -30kt growth (%)
20
Bar value = ‘000 tonnes cwt
Russian
Federation
-6%
-51
53
259
Israel
33%
-46
China
46%
Canada
-16%
73
Korea
20%
82
311
65
56
Philippines
52%
Algeria
60%
US
3%
93
Vietnam
38%
Iran
120%
200
51
Malaysia
21%
Eygpt
42%
150
Indonesia
79%
74
Chile
41%
-42
Rep.
South
Africa
-52%
Source: OECD-FAO Agricultural Outlook Database July 2016
United Kingdom
Page 12 – Global agri benchmark network results 2016 – BEEF
MLA Market Information Report – How are global and Australian beef producers performing?
Pasture-based beef farm profitability
In 2014, with much of the north Australian cattle herd being affected by drought (depressing cattle prices for all
producers), the ‘typical’ Australian beef cattle pasture-based farms monitored by agri benchmark (all of which have both
cow-calf and finishing operations) were mostly profitable in the short-term4, with around half profitable or breakeven
in the medium-term, but all unprofitable in the long-term. This situation changed significantly in 2015, which generally
occurred due to a concurrent reduction in the costs of production (effects of drought reducing) and an increase in beef
prices (but still not up to global levels).
There is, however, a large variation in the performance of the Australian ‘typical’ beef grazing farms, with the main
determinants appearing to be farm size, location (drought severity) and cost efficiency. Two of the eight Australian agri
benchmark farming systems being monitored experienced long-term profits. Generally, long-term profitability improves
as farm turnoff increases and costs are kept relatively low, with the largest Queensland farm (turning off 930 cattle) and
another South-East Queensland farm (turning off 310 cattle) both returning a good long-term profit in 2015.
In 2015, all of the Australian systems achieved a short-term profit margin, and all but one achieved medium-term profits
(only the NT farm did not produce a medium-term profit). This is a significant improvement on 2014, and subject to the
severity of drought during late 2015 and early 2016, is expected to improve further in 2016 due to current cattle prices.
Globally, however, recent reductions in price are expected to further reduce cow/calf and beef finishing profitability from
the levels achieved in 2014 and 2015.
Figure 17: Whole farm profit margins for combined cow/calf and beef finishing enterprises5
100
Short-term (Cash)
%
Medium-term (Cash-Depreciation)
Long-term (Cash-Deprec. - Opp. costs)
Long-term (excluding gov. payments)
75
50
25
0
-25
-50
-75
-100
-125
AU-2500 / AU-930
AU-750 / AU-280
AU-1550 / AU-360
AU-520 / AU-310
AU-500 / AU-450
AU-200 / AU-85
AU-350 / AU-150
AU-180 / AU-65
ID-4 / ID-2
KZ-500 / KZ-800
ID-2 / ID-1
CN-140 / CN-70
CO-400 / CO-130
PY-1550 / PY-550
BR-670 / BR-670
CO-220 / CO-350
BR-600 / BR-240
BR-130 / BR-35
BR-400 / BR-400
UY-220 / UY-90
AR-850 / AR-380
AR-1100A / AR-800
AR-800 / AR-630
UA-410 / UA-275
UA-295 / UA-5600
PL-45 / PL-20
CZ-420 / CZ-100
SE-95 / SE-100
UK-70 / UK-45
UK-100 / UK-80
FR-80 / FR-70
Source: agri benchmark
ES-150 / ES-520
FR-80B / FR-60
AT-30 / AT-25F
-175
DE-1400 / DE-800
-150
AUSTRALIA
France
4 Short-term profit is where returns (from sales and coupled government payments) covers all cash costs (including interest and family
wages), medium-term profit allows additionally for depreciation, and long-term profit allows for the opportunity costs of land and other
capital invested. Opportunity costs on capital, such as land, is calculated using a market leasing rate in each country.
5 Net profit margin on a whole farm basis is profit as a percentage of gross returns from all income sources (including crops, wool, lamb
etc).
Global agri benchmark network results 2016 – BEEF – Page 13
MLA Market Information Report – How are global and Australian beef producers performing?
How efficient are Australian beef producers?
Cow-calf enterprises
Stocking rates of cow-calf enterprises
Northern Australian cow-calf systems have relatively low stocking rates, on a par with similar rangelands of Montana
and Kansas (US), Alberta (Canada), and semi-Kalahari bosveld (South Africa). However, southern Australia’s higher
rainfall systems maintain high stocking rates and land productivity, similar to the European and the more intensive South
American systems.
Weaning rates (calves per 100 cows)
The majority of the world’s cow-calf systems tend to maintain similar reproductive rates at around or above 90 calves
per 100 cows. However, north Australian systems maintain reproductive rates similar to comparable extensive cattle
systems in South America (Brazil, Colombia, Paraguay, Uruguay) and Africa, which range from 50 to 80 calves per 100
cows. Southern Australian systems tend to perform comparably to European, North American and more intensive South
American (Argentina, Uruguay) systems. Depending on the costs and benefits of change, this is likely to be an area for
further improvement in northern Australia.
Total live weight produced per cow
Beef production per cow ranges from 100-480 kgs globally (kg live weight (lwt) produced per cow per year) – weaners
are the main part for most systems, with culled adults being the second most important contributor. The performance
of Australian systems is in the middle and is quite diverse, ranging from 210kg to 340kg lwt, with the exception of the
northern Australian system (AU-1550 northern live export) that is comparable to other rangelands based systems and
the cut & carry systems of Indonesia at around 104kg lwt per cow (most of which is the sale of cull females). This could
potentially be an area for significant improvement. This indicator is driven by genetic capacity, mature size of the breed,
nutrition, reproductive rates, generation interval, growth rates and turn-off weights.
Figure 18: Total kg live weight produced per cow
Adult cattle sold/going to finishing
500
Calves sold/going to finishing
Breeding animals
Kg lwt produced per cow
Cull and slaughter animals
AUSTRALIA
450
400
350
300
250
200
150
100
50
Source: agri benchmark
AT-30
IE-30
DE-1100
FR-85
UK-105
AU-180
CN-2
UK-70
US-160
DE-1400
US-240
DE-300
US-600
ZA-400
CA-200B
AU-350
AU-200
AU-2500
CN-140
CA-200A
ZA-350
CA-800A
AR-800
AU-750
ZA-200
ES-150
AU-500
UY-115
AR-850
AU-520
RU-450
NA-290
AR-1100A
BR-130
CO-1100
PY-1550
UY-220
MX-120
BR-400
BR-670
UY-150
CO-220
ID-4
BR-2500
ID-2
AU-1550
0
Farm Identification is number of cows
Weaner and cull cow prices
Overall, Australian weaner prices are similar to those elsewhere in the pasture-based systems of the southern
hemisphere (Colombia, Paraguay, Namibia and South Africa), but 30-40% lower than prices in Brazil, Argentina, Uruguay
and the EU; and around half the prices received in China and Indonesia. In 2015, Australian prices recovered partly
from the lows of 2014, but continued to be only 40% of those received in North America (Canada and US). Cull cow
prices in Australia tend to be similar to those of South America and Africa, but are only 20-35% lower than those
received in North America, Europe and Asia.
Page 14 – Global agri benchmark network results 2016 – BEEF
MLA Market Information Report – How are global and Australian beef producers performing?
Total cow-calf returns6
In 2015, Australia had comparably low total returns from cow-calf operations, due to a combination of significantly
lower weaner and cow prices and moderate production levels (weaning rates and production per cow). Some countries
in South America and Africa maintained similar returns, whereas the US, Canada, Asia and Europe maintained higher
returns. European countries also maintain higher returns through additional government payments (both coupled and
de-coupled payments).
Total cost of cow-calf production
Australia maintains a comparably low total cost of production in cow-calf systems, but similar to comparable systems
in South America, some Canadian and South African typical cow-calf systems. The exception in the Australian data is
AU-500 (North-West Slopes NSW) which had high animal purchases (replacing breeders) and feeding costs in 2015.
Globally on average, the cost of production has declined from 2013 to 2015, in part due to exchange rate movements.
Australian systems, on average, maintain the lowest total cost of production, and the ongoing decline in total cost of
production has occurred across both northern and southern Australian beef production systems from 2014 to 2015. Only
European and African systems have had similar declines, whereas North and South American systems have generally
not changed.
In most countries non-factor costs make up 30-60% of the total cost of production, and Australia tends to have similar
cost structures to that of the North and South Americans. Most European countries maintain total costs of production
2-3 times higher than that for the low cost countries like Australia.
Figure 19: Total cost of cow-calf production (USD per 100kg live weight sold)
900
Total Costs (USD/100 kg lwt sold)
Total capital cost
Total labour cost
Total land cost
Non-factor costs
800
700
600
500
400
300
200
100
Source: agri benchmark
S Africa 1800
S Africa 850
S Africa 1500
Namibia 3000
Tunisia 40
Namibia 1000
Jordon 100
Morocco 300
NZ 3200
Algeria 300
AUSTRALIA
WA 7800
WA 4800
Vic 3000
WA 2000
NSW 1600
NSW 1250
NSW 1500
China 340
China 400
Uruguay 600
Colombia 380
Brazil 35
Brazil 150
Mexico 300
UK 450
UK 500
UK 400
Ireland 230
France 750
France 860
France 470
France 500
Spain 970
France 460
Spain 800
Spain 900
Germany 600
Germany 1200
0
Farm Identification indicates number of cows
Labour costs and productivity
Labour costs in Australia are amongst the highest in the world, but have declined since 2013 in US dollar terms.
Australia’s average wages paid for employed staff in 2015 is around USD19/hr, with the opportunity cost of family labour
around USD21/hr. European countries averaged USD15/hr (excluding Russia @ USD4/hr), North American countries
USD19/hr (Canada averages USD21/hr, excludes Mexico @ USD1/hr), and South American USD7/hr. Taking into account
the productivity of the labour (labour costs per 100kg lwt beef produced), the contribution of labour costs to the
production of beef from Australian cow-calf systems is similar to, or lower than, that achieved in the most cost-efficient
African, Asian, South American and North American systems, where labour is cheaper. European systems have high
labour productivity costs due to low productivity per unit of labour input, whereas Canada has similar labour costs and
lower productivity than most Australian systems.
6Total returns include all returns specific to the cow-calf enterprise, such as cull and slaughter animals, breeding animal returns and
calves/weaners sold or transferred to finishing and government payments.
Global agri benchmark network results 2016 – BEEF – Page 15
MLA Market Information Report – How are global and Australian beef producers performing?
Total costs, returns and profitability of cow-calf production in 2014
The South American and Australian systems, and some Asian and South African, maintain the lowest cash costs and
total costs. Most cow-calf systems are capable of producing short- and medium-term profits (enterprise returns less cash
costs and depreciation), but only a few producers are capable of producing long-run profits (enterprise returns less total
costs including opportunity costs).
Six of Australia’s eight pasture-based farms achieved long-run profits from the cow-calf portion of their operations in
2015. With total returns increasing by around 30% in Australia from 2014 levels and total costs declining, the profitability
of Australian systems is at a record high since 2006. Only Canadian, US and some systems in South America, Asia and
Africa cover their opportunity costs.
Generally, European systems are high cost systems and most were not capable of maintaining medium-term profits
in 2015, although some achieve short-run profits. With additional returns provided by government payments (coupled
payments), most cover cash costs and depreciation.
Figure 20: Costs, returns and profitability of cow-calf production 2015 (USD per 100kg live weight sold)
700
Cash and non-cash costs & returns (USD/100kg lwt)
Opportunity cost
Depreciation
Cow/calf returns
Cow/calf returns + Government payments
Cash cost
600
500
400
300
200
100
NA-290
ZA-350
ZA-400
ZA-200
AU-2500
AU-750
AU-520
AU-1550
AU-350
AU-500
AU-180
AU-200
ID-4
ID-2
CN-2
CN-140
PY-1550
CO-220
CO-1100
BR-670
BR-2500
BR-130
BR-400
UY-115
UY-150
UY-220
AR-850
AR-1100A
AR-800
MX-120
US-600
US-160
US-240
CA-200B
CA-800A
CA-200A
IE-30
RU-450
UK-70
UK-105
FR-85
ES-150
DE-1100
DE-1400
AT-30
DE-300
0
AUSTRALIA
Source: agri benchmark
Farm Identification indicates number of cows
In comparison… Australian cow-calf systems have:
• More diversified whole farm systems (maintaining both cow-calf and finishing systems within the same business)
• Moderate-to-low weaning rates and moderate-to-low productivity per cow, especially in northern systems which
have comparatively low reproductive rates, extended generation intervals, lower growth rates and turn-off
weights.
• Lower revenues due to significantly lower weaner prices (30% lower than South America and only a third of prices
received in North America) and cull cow prices, although there has been a 30% improvement in total returns from
2014 to 2015.
• Australian systems have continued to reduce, year-on-year, the cost of cow/calf production, which is in part due to
exchange rate movements.
• 2015 was the most profitable year since 2006, with all Australian systems achieving good short- and mediumterm profits during 2015, and all but 2 systems achieving long-term profitability, which has been a year-on-year
improvement since 2013.
• High labour productivity (kg lwt produced per hour of labour input) to compensate for high wage rates (although
the differences in the cost of wages are reducing, which is in part due to exchange rate movements).
Page 16 – Global agri benchmark network results 2016 – BEEF
MLA Market Information Report – How are global and Australian beef producers performing?
Cattle finishing enterprises
There was some improvement in beef cattle farm finishing enterprise profits in 2015 across almost all countries.
While beef finishing farms in almost all countries made short-term (cash) profits in 2015 (one exception being eastern
Australian farms in drought) and medium-term profits (covering cash costs and depreciation), few made a long-term
profit (do not cover the opportunity cost of inputs).
Liveweight at start and weight at end of finishing phase
Data indicates that many European systems (predominantly silage/grain based) have long finishing periods and high
final weights (600-720kg finished live weight) with very low comparable starting weights in some systems (~ 100kg lwt).
These cattle come from dairy herds and are either Holstein or dual purpose breeds, like Fleckvieh.
Australian systems are similar to South American, African and UK systems, which have similar total weight gains in finishing
(400-540kg finished live weight) and similar entry weights (200-300kg lwt). South American systems tend to be in-between
(150-200kg lwt at entry with around a 450-500kg finished weight). In all these countries, the majority of feeder cattle come
from specialist cow-calf operations, hence animals are often older and heavier when they enter the finishing process.
Some Australian and South American systems on pastures are characterized by long finishing periods of 500-1000 days.
Figure 21: Change in live weight during finishing (kg)
800
Weight at end (kg lwt)
Change in lwt during finishing (kg per head)
600
500
CUT & CARRY
700
FEEDLOTS
Weight at start (kg lwt)
PASTURE SYSTEMS
SILAGE SYSTEMS
AUSTRALIA
400
300
200
CN-300
CO-800
RU-640
UK-90
DE-800
FR-70
UK-750
CN-70
UK-45
AT-120
CN-150
AT-35
AT-175T
DE-280
FR-60
DE-260
FR-200
ID-100
AR-800
AU-360
AU-150
AU-85
BR-35
AU-310
CO-350
AU-930
AR-380
AU-65
PY-550
AU-450
BR-240
UY-90
NA-600
PY-1400
BR-800
BR-60
CO-130
BR-1750
BR-500
NZ-375
AU-280
UK-80
IE-40
AR-630
AR-900
CN-2000
BW-3000
AR-26K
ZA-75K
NA-25K
MX-1500
ZA-3000
ES-430
BR-680
PE-1700
ES-5500
ES-520
CN-940
US-7200
US-75K
CA-28K
0
ID-4
ID-2
100
Farm Identification is number of finished cattle sold
Source: agri benchmark
Daily and net weight gain
There is a clear reflection between the daily weight gains observed in the data and the observed changes in liveweight
and the extent of the finishing period. As would be expected, most feedlot weight gains exceed those achieved in
pasture and silage systems. Notably, around 80% of the European silage based systems achieved similar or higher
weight gains than the lowest performing feedlots from China and Argentina.
Our pasture based systems had very mixed results for 2015, as our best pasture based systems rank 1st (AU-450, NW
NSW), and 2nd (AU-65, NSW northern tablelands) when compared to other pasture systems on daily weight gain. In
contrast, northern Australian systems continue to record some of the lowest weight gains (AU-360 & AU-280) and are
similar to weight gains achieved in South American and African systems.
Figure 22: Daily Live weight gain (grams/day)
1,800
1,600
1,400
Daily liveweight gain (grams/day)
CUT & CARRY
2,000
FEEDLOTS
PASTURE SYSTEMS
SILAGE SYSTEMS
AUSTRALIA
1,200
1,000
800
600
400
Source: agri benchmark
UK-45
UK-90
UK-750
CO-800
DE-800
RU-640
DE-280
CN-300
CN-150
FR-70
DE-260
AT-35
AT-120
CN-70
FR-200
AT-175T
FR-60
AU-360
UY-90
NA-600
AU-280
BR-240
AU-930
AU-150
BR-60
PY-550
AU-310
CO-350
BR-800
PY-1400
CO-130
BR-1750
BR-35
ID-100
AU-85
BR-500
AR-380
AR-800
IE-40
UK-80
NZ-375
AU-65
AU-450
AR-900
CN-940
CN-2000
AR-630
ES-430
MX-1500
ES-520
ES-5500
AR-26K
US-7200
PE-1700
CA-28K
ZA-75K
US-75K
ZA-3000
NA-25K
BR-680
BW-3000
0
ID-4
ID-2
200
Farm Identification is number of finished cattle sold
Global agri benchmark network results 2016 – BEEF – Page 17
MLA Market Information Report – How are global and Australian beef producers performing?
Comparison of beef prices from 2012 to 2015
Beef carcass prices generally ranged between USD200 and USD500/100kg cwt across the globe in 2015, with the
exception of closed or protected markets (through both tariff and non-tariff trade barriers), such as China and Indonesia,
where China experienced a small decline in beef prices from 2014 highs.
European beef prices generally decreased again from 2012-2014 levels and are relatively consistent internally and
higher than southern hemisphere prices (as European prices are maintained by import barriers), with the exception of
non-EU countries such as Russia and the Ukraine.
Canada and the USA have both experienced significant increases in beef prices from 2013 to 2014, and they have
largely been maintained into 2015.
Australia, southern Africa and South American pasture-based systems receive some of the lowest prices (reflecting
lower costs and, in Australia’s case, drought and cattle over-supply), although there has been some significant increases
from 2014 levels for the northern Australian system (NT-360).
Figure 23: 2012-2015 beef prices received (USD/100kg lwt sold)
900
800
Farm gate beef prices (USD/100kg lwt sold)
2012
2013
2014
2015
700
600
500
400
300
200
100
Farm identification is number of finished cattle sold
Namibia
Botswana
Tunisia
South Africa
Morroco
NZ-375
Central Qld-930
NT-360
Nth NSW-450
SE Qld-310
VIC-150
Central Qld-280
Sth NSW-85
Nth NSW-65
China
Indonesia
Peru
Paraguay
Brazil
Colombia
Uruguay
Argentina
USA
Mexico
Canada
Russia
Czech
Ukraine
Poland
Sweden
UK
Source: agri benchmark
Ireland
Italy
Spain
France
Austria
Germany
0
AUSTRALIA
Costs of finishing
Although a high A$ and the drought have generally raised the cost of Australian beef production in recent years (2013
and 2014), in USD terms, relative to farms in the Americas and Europe, in 2015 most Australian systems experienced
a significant reduction in the total costs of finishing with either a concurrent rise in prices or similar returns being
achieved.
For the majority of the world’s finishing systems it costs around USD4-6 per kg live weight sold in 2015. This represents
a slight reduction on 2014 costs. The lowest cost finishing systems exist in Africa and South America. AU-930 and AU280 (both Central Qld systems) maintain comparably low costs (similar to South America and African systems), whereas
the other Australian systems are comparable to the lower cost European and North American finishing systems. The
highest cost systems continue to occur in Europe (Germany, Austria and the UK) and Asia (China and Indonesia). New
Zealand notably moved from a low to a moderate cost finishing system in 2015 due to recent increases in the cost of
purchasing backgrounder cattle (in USD).
Ukraine
Page 18 – Global agri benchmark network results 2016 – BEEF
MLA Market Information Report – How are global and Australian beef producers performing?
Total costs and farm rankings
In 2015, the majority of feedlot and pasture based finishing systems tended to have lower costs than silage systems,
although they are now only marginally lower when compared to 2013 and 2014. Non-factor costs dominate in each
finishing system (of which 30-70% is the cost of transferred/purchased livestock), although land, capital and labour
contribute more significantly within pasture and silage systems per unit of output.
Figure 24: Total average long-run cost of production (USD/100kg liveweight sold)
1,200
800
Non-factor costs incl. depreciation
Total labour cost
Total land cost
Total capital cost
FEEDLOTS
CUT & CARRY
1,000
USD/100kg liveweight sold
PASTURE SYSTEMS
SILAGE SYSTEMS
AUSTRALIA
600
400
200
Source: agri benchmark
CO-800
RU-640
DE-525T
DE-280
FR-200
CN-300
AT-175T
DE-260
UK-90
CN-150
AT-120
CN-70
FR-60
FR-70
AT-35
UK-750
DE-800
UK-45
PY-1400
BR-500
NA-600
BR-240
CO-350
BR-1750
CO-130
BR-800
AU-930
AU-280
PY-550
UY-90
AU-310
NZ-375
AU-150
BR-60
AR-380
AU-450
ID-100
AU-85
AU-360
AR-800
AU-65
IE-40
BR-35
UK-80
NA-25K
ZA-75K
ZA-3000
BW-3000
PE-1700
MX-1500
BR-680
ES-5500
AR-26K
AR-900
US-75K
AR-630
ES-430
US-7200
CA-28K
ES-520
CN-2000
CN-940
0
ID-4
ID-2
100
Farm Identification is number of finished cattle sold
The Australian systems, all pasture based, had mixed outcomes for the total costs of finishing (in USD) in 2015. For some
systems, the costs increased due to a rise in the cost of transferred/purchased livestock, whereas others had a marked
decline in the cost of feeding, or a combination of the two.
Finishing costs, returns and profitability
The majority of beef finishing systems around the world did not generate high enough returns to cover total costs of
production in 2015 (long-run costs, including cash, depreciation and opportunity costs) and, in many cases, did not
cover medium-term costs of production (cash costs + depreciation), but most managed to break-even against short-term
(cash) costs. For the majority of beef finishing systems, profitability has generally improved year-on-year since 2013.
Around half of the South American systems cover their short- and medium-run costs, with only a few covering the
opportunity costs and generating long-run profits. All finishing systems in China continue to generate long-term profits,
although experiencing both increases in costs and reductions in returns from 2014 levels. The only other systems to do
so are US and Namibian feedlots (US 75k and Namibia 25k, respectively), and a small herder system in Indonesia (Indo
4). In New Zealand the finishing system maintained a short- to medium-term breakeven position.
Of Australia’s eight pasture-based finishing systems analysed, seven covered both short- and medium-term costs in
2015, which is an improvement on 2013 and 2014 performance, however, only one farm (Central Qld 930) covered total
costs (inclusive of opportunity costs). This is due to both comparably lower beef prices, and higher costs of transfers/
purchased livestock for most systems in 2015. Although most Australian finishing systems maintain relatively lowmoderate cash costs of production and depreciation costs, they have high opportunity costs (mainly land and, to a
lesser extent, family labour).
It is also noticeable that in Europe, even with the maintenance of low levels of government payments (coupled
payments), most beef finishing systems did not produce a short- or medium-run profit, unlike cow-calf systems (which
receive higher levels of government payments).
Global agri benchmark network results 2016 – BEEF – Page 19
MLA Market Information Report – How are global and Australian beef producers performing?
Figure 24: Cattle finishing costs, returns and profitability in 2015 (USD/100kg cwt sold)
1,200
Finishing costs and returns (USD/100kg cwt sold)
Opportunity cost
Depreciation
Beef returns
Beef returns + Government payments
Cash cost
1,000
800
600
400
Source: agri benchmark
Farm Identification indicates number of finished cattle sold
NZ 375
S Africa 3000
S Africa 75K
Namibia 600
Namibia 25K
Botswana 3000
Nth NSW-65
Sth NSW-85
VIC-150
Central Qld-280
SE Qld-310
NT-360
Nth NSW-450
Central Qld-930
China 70
China 150
China 300
China 940
China 2000
Indo 2
Indo 4
Indo 100
Arg 380
Arg 630
Arg 800
Arg 900
Arg 26K
Uruguay 90
Brazil 35
Brazil 60
Brazil 240
Brazil 500
Brazil 680
Brazil 800
Brazil 1750
Colombia 130
Colombia 350
Colombia 800
Peru 1700
Paraguay 550
Paraguay 1400
Canada 28K
US 7200
US 75K
Mexico 1500
0
Austria 35
Austria 120
Austria 175T
Germany 260
Germany 280
Germany 525T
Germany 800
France 60
France 70
France 200
Spain 430
Spain 520
Spain 5500
UK 45
UK 80
UK 90
UK 750
Ireland 40
Russia 640
200
AUSTRALIA
In comparison…Australian beef finishing systems have:
• Moderate-to-high weight gains in southern beef systems, but low weight gains in northern beef systems, partly
due to drought, but mainly due to their feed base (with performance comparable to pasture-based South
American and African systems).
• Received below average prices when compared globally, again reflecting a low cost base and the continuing
impact of drought and an over-supply of cattle into 2015. Most countries experienced a slight reduction in beef
prices between 2012-2013 and 2015, in USD (excluding the US, Canada and China, where higher prices have been
maintained).
• Low-to-moderate costs of production, with returns that generally covered the medium-run costs of production –
which out-performs most beef finishing systems in the world (excluding China).
• Returns that improved marginally in 2015 from 2013-2014 levels – which is opposite to most beef finishing
systems around the world.
• High land and labour opportunity costs, which tend not to be covered through beef returns.
• Lower levels of profitability than the cow/calf component of the whole farm beef production system – a consistent
observation over the last four years.
Brazil
Page 20 – Global agri benchmark network results 2016 – BEEF
MLA Market Information Report – How are global and Australian beef producers performing?
Signs of new investment in beef farms
The significant lift in global beef prices since 2011, together with further falls in prices of competing enterprises
(especially cropping and dairy) has triggered moves to rebuild global cattle herds, notably in North America, South
America, China and Australia. While the South American response seems slow in emerging (partly due to drought and
economic/political problems), reduced soya bean profitability is seeing some land switched towards forage production
for increased on-farm feeding for beef production.
In contrast, the initial US response has been more rapid than expected.
However, the quick decline in beef prices in 2015 and 2016 (in USD), a lack of long-term beef farm profitability globally
(despite the recent price lift), continued climate volatility (especially drought) and growing resource and environmental
constraints, suggests that a major cattle production and price cycle is unlikely. Furthermore, the latest EU CAP reforms
(especially reduced single farm payments in favour of per hectare and ‘green’ payments) seem likely to continue the
long-term reduction in EU cattle herds and production.
However, this issue needs close monitoring, as major positive beef price shocks like that experienced since 2010 have,
in past decades, triggered disruptive cycles of around 10-year duration (especially in the US) – with natural biological
production lags eventually causing beef supply to over-correct, leading to a major beef price slump. It is notable that
neither the OECD-FAO nor USDA is expecting a major cyclical oversupply to develop this time.
China
Global agri benchmark network results 2016 – BEEF – Page 21