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Shoppers are unlikely to see cheaper steaks at the butcher anytime soon despite a near 40 per cent drop in beef prices in Australia.
Key points:
- Cattle prices have dropped nearly 40 per cent over the past nine months
- The fall has been attributed to an oversupply in Australia as well as constraints on abattoirs to buy and process more cattle
- Meat prices are unlikely to drop due to ongoing issues with labour and supply chains
Meat prices have been rising since 2020, due to skyrocketing cattle prices during the pandemic.
The Eastern Young Cattle Indicator (EYCI), which tracks young cattle prices, hit a record 1,191 cents per kilogram in January last year but has now fallen to about 700 cents per kilogram.
NAB economist Phin Ziebell said there were several factors behind the price drop, including an oversupply of cattle in Australia.
"What's happened is, we had the drought, we had the herd rebuild, the herd rebuild is done," Mr Ziebell said.
"We've had these really great three years, three wet years. And now there are big increases in numbers of young cattle that coming to market."
Mr Ziebell said increased slaughter rates in the United States and a lack of capacity at Australian abattoirs had also forced prices down.
End of food inflation?
Mr Ziebell said the price drop signalled a possible end to continued food inflation.
"We've come off highs, we're still way higher than we were pre-COVID, so this is not pointing to declines back to the old world," he said.
"But it is suggesting that the big peak that we had has passed, and we're now seeing some downsides."
But he said it was unlikely those savings would be passed onto consumers, with ongoing problems with supply chains and labour adding to costs.
"[Beef] has been a special treat for consumers increasingly," Mr Ziebell said.
"Dropping wholesale prices, in terms of your weekly grocery shop, unless you're a huge carnivore, is unlikely to be something which materially eases your situation.
"Certainly from a consumer level, these price declines are something that is good for them, but at a producer level unfortunately the opposite applies. It's a zero-sum game."
Dalby business owner Elisha Beil said she had yet to see any major drop to beef prices at her butchery.
"There's a very slight fluctuation from week to week but with the increasing price of everything else, we just keep absorbing it," Ms Beil said.
"When something really goes up, you've got to adjust [prices] by [something like] $1/kg … just to make sure that you're paying wages and covering all costs."
Ms Beil, who purchased direct from beef producers across the Western Downs, said customers were understanding of why prices were still so high.
"They know we have to charge what we have to charge or else we wouldn't be here," she said.
"And it's not a lucrative business, butchering, but you've just got to make a little bit."
Bidding slowdown
For cattle agent Brendan Gilliland, there has been a marked difference at the Dalby cattle sales.
"Last year, as an agent, when you stood up on the catwalk as an auctioneer to sell your cattle, the crowd was 10 deep and everybody was bidding profusely. They were scrambling to buy cattle," he said.
Mr Gilliland said the price drop had already started eating into the profits of farming families.
"They've had two or three good years, but we know what farming is like," he said.
"Quite often a lot of those profit margins get used up quickly, so to see that the last six or eight or 10 months has sort of gone around for not a lot of profit is making things hard."
Darling Downs beef producer Marty Frame said many in the industry had been caught off-guard by the timing of the market correction.
He said the recent dry weather was also putting extra pressure on producers to sell their cattle.
"They're not properly panicking yet, but I think they're ready to pull the trigger," Mr Frame said.
"We just got to keep plugging along. We just won't have as much money at the end of the year to spend on stuff, but we'll come out the other side."
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