Producers share of red meat retail spend continues to slide

Quarterly consumer pricing data shows the producer share for the retail spend on lamb eased from 46.7 per cent in the June quarter to 36.5pc for the September quarter, the lowest level seen since it reached 35.4pc in the final quarter of 2007.

The producer share of the retail spend on beef dropped from 35pc last quarter to 30.5pc for the September quarter.

This is the lowest the producer share of the retail spend on beef has been since the first quarter of 2010 when it was 29.6pc.

It comes as saleyard prices continue to drop at a faster rate than red meat retail prices.

Episode 3 market analyst Matt Dalgleish said it was important to recognise that saleyard pricing has reached some high peaks in recent years, whereas retail price increases have been more moderate in comparison.

"Therefore the same goes when the price starts to come off, the saleyard volatility is higher than the retail, which is what you expect when it comes to being a consumer product," he said.

"It's the same with a commodity like wheat as well, wheat on a global market fluctuates quite a lot but it doesn't mean that the price of bread in the supermarket changes as much.

"There's a reasonable supply chain there that all has to take their margin, whether it's the processor, the packaging, or the manufacturers."

Mr Dalgleish said there was quite good growth in the producer share of lamb's retail spend over the last two decades, driven by export growth.

"Obviously this most recent correction has seen that decouple somewhat, we're back to pretty low levels," he said.

"When we saw those peaks in pricing at the saleyard through the last rebuild, particularly for lamb... the retail price did go up but nowhere near the same levels that the saleyard did.

"Red meat processors were struggling big time with their margins through that period... it wasn't just the processors that struggled, particularly for lamb all the way through to the retail end, supermarket prices went up but nowhere near as much as it needed to.

"There were some instances where lamb was being used as a bit of a loss-leader to a degree, the margins were very slim at a retail level, trying to encourage people into the store.

"Now maybe some of the participants in the supply chain are using this as a bit of an opportunity to recapture some of the margin they didn't get."

As scrutiny continues around pricing, South Australian media personality Andrew "Cosi" Costello has been using Facebook to try to take bulk lamb orders straight to the consumer.

Mr Costello used AuctionsPlus in October to buy 315 24 kilogram lambs and then organised three Adelaide Hills butchers to prepare them as whole lambs, before selling them at cost price.

Once he put the link live on Facebook, the lambs sold out within 22 minutes.

"I paid $95 plus GST for the lambs and then when I added in slaughter costs, transport and everything, that equated to $169 per lamb," he said.

"All I really wanted to do was provide a different way to provide cheap meat to families in South Australia.

"For me it was really just about encouraging people to fill their freezers up and help suck up a bit of the glut of lamb that's on the market at the moment, and get some cheap meals."

Mr Costello, who himself runs about 1000 sheep, said he wanted to encourage people to use their freezer space, while also providing another avenue for some of the current lamb oversupply.

"The most economical way to buy lamb is either as a side or a whole so I really want to encourage people to do that and to talk to their local butcher," he said.

"I love being able to use my position in the media to highlight the plight of farmers, or to showcase the amazing produce they put together and just how world class it is."