Finding a niche in the US

AMERICAN beef producers continued to sell off the US herd through 2013, establishing conditions for beef consumption in the United States to come under increased price pressure from chicken and pork.

The depletion of the US herd, now at 60-year lows after a long spell of adverse weather and cattle prices, coincides with a bumper corn crop and falling corn prices.

That will see increased chicken and pork production, MLA’s North American regional manager David Pietsch reports, driving down prices for those proteins at a time when beef prices are rising.

“We now have to see at what point US consumers begin to resist paying more for beef as chicken and pork get cheaper,” Mr Pietsch said.

That’s already playing out on restaurant menus, where new items tend to favour price-competitive chicken or pork.

The vast US manufacturing beef industry is Australia’s second-largest beef export market. Manufacturing beef accounts for 70 per cent of Australia’s beef exports to the US – the lean Australian product is combined with the fattier lot-fed local product to make the 78CL burger pattie.

Ground beef constitutes 55-60 per cent of US beef consumption.

However, Mr Pietsch said niche beef categories – organic, Wagyu, grassfed – are surging.

Shipments of branded grassfed beef topped 30,000 tonnes in 2013.

“Twelve months ago we would have had less than 1000 stores in the US that had a branded grassfed AU product,” Mr Pietsch said.

“Now we’re looking at more than 10 chains and 3000 stores.”

Overall, the niche markets are a small proportion of the overall Australian beef shipment to the US, but their value is sizeable, and growing.

“In a country of 320 million people, a niche category can make a very tidy business,” Mr Pietsch observed.

“What we’re trying to do is add value: to take our beef and put it into branded programs that derive a greater return. It’s less about volume. By branding the product and putting a story around its attributes, we can extract a little more value.”