Soaring beef costs challenge global meat industry

19-Jun-2013 - Last updated on 20-Jun-2013 at 09:56 GMT

Related tags Beef European union Meat

Beef about costs: the soaring costs of beef production are a challenge to the global industry

The gap between beef prices and the cost of production is narrowing across the globe – with developing countries in particular recording vast increases in the amount it costs to produce protein.

The impact this has on profitability is one of the key challenges facing the global meat industry, said Claus Deblitz, from the Thunen Institute of Farm Economics in Braunschweig, Germany and coordinator of research network Agri Benchmark.

He told the beef and sheep Global Forum in York this week (June 19) there was a clear global divide both in terms of price rises and cost of production increases.

“The non-EU countries [specifically Brazil, Argentina and China] have seen a far bigger upward trend in prices than Europe across the past 10 years,” he said, although British beef prices are currently the highest in Europe.

Deblitz added: “Even if some recent price increases trigger increased production, prices would still go upwards.”

Climate change

While growing demand, rising incomes, more regulation and the impact of climate change meant that soaring prices in the countries outside the EU is little surprise, the scale of the increase in the costs of production in these countries is significant.

“The gap between prices and costs is clearly narrowing,” said Deblitz.

He cited figures that showed the amount it costs to produce 100kg carcass weight of beef in US dollars had increased by 150% in China between 2005–12, by 100% in Brazil and by between 80% and 120% in Argentina, depending on production methods.

The rise in production costs have come at a time when the outputs from countries such as China and Brazil have rocketed.

Following a similar pattern to price developments, EU countries had seen a rise in production costs over the same period, added Deblitz, but not to the same extent. The latest data suggested an increase of about 20%.

Despite the lower increase, Deblitz said this was still posing a key challenge.

“High meat prices and costs across the world means profitability is low, especially for beef, driven by feed, land, energy and labour costs,” he said.

“Beef is also a particular challenge because the feed conversion of grain is not so good and emissions are high.”

Food safety

Deblitz highlighted several other challenges the meat industry faced, including animal disease, technical barriers, more animal welfare regulation and food safety concerns.

With regard to the recent horsemeat scandal he said: “If I imagine I am a packer, sitting on lots of pieces and cuts of meat, that business must be incredibly difficult now.”

Deblitz said the beef sector was especially vulnerable to changes in consumer trends because it “could be difficult to prepare”, while the meat industry as a whole had to be wary of the growing popularity of vegetarianism, albeit from a low base.

However, this was challenged by Peter Hardwick, head of trade development at EBLEX, the organisation for the English beef and lamb industry, who said lower consumption was more of a challenge than vegetarianism.

“I also have to disagree about beef being hard to prepare,” he added. “The most convenient food in the world is the hamburger.”