Beef Boom Times: Are you ready?

RURAL AND AGRIBUSINESS

Many commentators report that the Asian middle class is expected to boom in numbers. So who is this middle class, and what are the implications? 

The middle class is defined as those having an annual income of between USD14,600 and USD146,000 (World Bank, 2007).

The Brookings Institute estimates:

  • That there were 3.2 billion people (globally) in the middle class at the end of 2016
  • The middle class is currently growing at around 140 million per year, with growth expected to peak at 170 million per year in five years’ time, or around 4%
  • 88% of the next billion people who enter the middle class are expected to come from Asia

So what does this mean for Australian beef producers? 

It means a change must occur; graziers can't afford to be price taking commodity producers, they need to influence market price through the quality they produce

The average producer cannot satisfy the many demands for branded beef products differentiated to the whims of the various export markets. 

Producers must be market driven in their focus and approach, not product driven.

To be successful, it is crucial to:

  • Establish which market sector/s can reasonably be serviced
  • Become a preferred supplier to downstream players that are vertically integrated and already successfully supplying export customers 
  • Consistently produce quality product/s within a sustainable and profitable cost structure

We already know that Asian customers choose Australian premium products due to our reputation for supplying high-quality and safe beef products. However, to truly penetrate the Asian market and particularly China, graziers need to develop stronger relationships with Chinese customers who import our product, because market access is the critical ingredient as to why our farmers are missing out. 

The Trans-Pacific Partnership was signed by the 11 participating countries on 8 March 2018. This reinforces the need for producers to be competitive in a global market where there is continued strong supply of beef. 

Looking to leading examples 

Building long lasting relationships requires support from all levels of Government, industry bodies and key stakeholders, but most of all, time to build trust. International companies such as Olam with strong ties to Asia, are able to buy quality agricultural assets and generate returns higher than what an Australian business can generate. They have a competitive advantage in terms of market access. 

With so many graziers out there, and a need for a co-ordinated approach, you only have to look to New Zealand to see how Fonterra has been successfully differentiating itself in the market by entering into long term collaborative joint ventures culminating in long term market access and security.

The beef industry needs to follow these examples and position itself to secure long term opportunities in this growing market by not just being a supplier but being a major partner in the supply chain. They need to meet the needs of different cultures, provide what the market requires rather than what we think they require and move away from being a commodity price taker. 

It is those graziers who are already seizing the opportunity by defining, or in some cases redefining their market, differentiating themselves, aligning themselves to be preferred suppliers, and building direct relationships with customers who will benefit most from this middle-class boom. 

How can we help?

Our Rural and Agribusiness team have worked with many beef producers to critically examine their market, products and align the business for success. Please contact one of our Rural and Agribusiness team members below if we can be of assistance.