Our Australian team sat down to chat about the obstacles facing the Australia/NZ meat market as we move into 2024. Here are their thoughts on our five big questions...
Kieran Best, Tom Redden and James Hennessy – From Foods Connected's business development and customer success team for the APAC region – are all procurement specialists. With over 50 years of industry experience between them, they know a thing or two about the ins and outs of the meat industry. We asked them about the state of the sector right now.
“We are currently facing into a period of increased supply in Australia, due to our transition from a rebuild to liquidation within the cattle cycle,” explains James. "So domestic buyers will face increased pressure from export markets which will be a challenge for them.
“The US in particular will start to be a much bigger player in our market than it has in the last two to three years due to dynamics over there. They are in a rebuild themselves which is tightening supply (I believe domestic grinding beef is up about 30% YOY) and when domestic beef gets expensive in the US, they lean heavily on import to manage costs. Australia being a major contributor.
"The US in particular will start to be a much bigger player in our market.”
“We are also struggling with labour here, which means less complex categories of livestock are preferable (less labour needed to bone them out). This, combined with increased female kill due to herd liquidation (cows are leaner), means we’re also going to see increased throughput of grinding beef, which will be the perfect storm to match US demand. Asia is also going to be a very important market for Australia, as we will be very competitive versus US beef.
"For now, if I was a buyer,” says Tom, “I would be taking short-term, conservative positions, because supply and demand projections at the moment indicate a softer market in late 2023.
“Then there’s the fact that livestock bookings are long term at the moment, which will allow packers here to further drive the supply price down.
“We are also coming into the time of the year where New Zealand’s bull and cow run’s commence, which will further increase supply across Australia and New Zealand.”
“Supply and demand projections at the moment indicate a softer market in late 2023."
“We are also coming into summer, which is a lower demand period for grinding beef and New Zealand’s bull run has started in November, which will further increase supply.”
Kieran’s immediate answer is compliance. “Organisations downstream are requiring more and more governance and compliance around procurement practices. The old days of trading the market and buying in pockets of value are disappearing as baseline requirements for compliance and getting tighter and tighter, forcing consolidation and increased cost to serve.”
For Tom it’s shipping uncertainty. “Global supply chain uncertainty has become the new norm. In a pre-COVID world, exporters could give, with some certainty, timelines for delivery and expect to be held accountable for those timelines. In the new environment shipping uncertainty is so normal that exporters are, at best, giving guidelines and ranges for delivery and updating dates as lead times draw closer.
This causes inefficiency and visibility issues in procurement practices, requiring export customers and exporters to potentially carry additional stock in their supply chain to cover gaps or changes in supply.”
“Shipping uncertainty is so normal that exporters are, at best, giving guidelines and ranges for delivery."
Increased big data usage is top of James’ list. “The requirement for digital data capture, reporting capability and actionable insights is changing the base skillset of procurement professionals in the meat industry.
Procurement professionals are required to understand data, have advanced skills in data processing tools/platforms and be able to draw deep, actionable insight for continuous improvement and governance activities. This requires a change in the industry approach to training procurement professionals by both advocacy/industry bodies and market leading organisations.”
Kieran calls out digitisation. “People are the meat supply chain’s biggest risk, and will be our biggest bottleneck as an industry as we move into a higher throughput period. Anywhere we can invest in digitisation to remove reliance on people in the supply chain is a worthy investment.”
Graduate programmes are key according to James. “The meat industry is a very tough industry to sell to graduates, compared to other areas within the food industry. In Australia, they do an amazing job through organisations like ICMJ (Australian Intercollegiate Meat Judging Association) and MLA (Meat & Livestock Australia) at highlighting the endless opportunities that our industry can offer to young people. But investment in this area is never wasted.”
“People are the meat supply chain’s biggest risk, and will be our biggest bottleneck as an industry."
It all comes down to forward planning for Tom. “The meat industry has long been a reactive and situational market which brings both operational inefficiencies and restrictions on profit maximisation. With the emergence of big data technologies and AI, an opportunity now exists for service providers to develop technologies that increase forward planning accuracy. Once this technology becomes mainstream and proven, organisations who invest will see tangible and lasting ROI as well as obvious reductions in food waste.
If you'd like to learn more about overcoming the barriers to digitalisation and adding value in the agri-food sector, watch our webinar on the subject below.
