Profitable beef for the North Asian market a financial analysis of Australian cattle production systems targeting Japanese and Korean beef markets

Summary

The Australian beef industry is currently experiencing changes to a number of important export markets. In particular the liberalisation of the Japanese market through changing policies and regulations (ABARE 1988) and the reopening of the Korean market to beef imports since 1988 have provided new opportunities. The beef industry has researched the best method of accessing the Japanese market under these new arrangements (MRC and AMLC 1990), and similar work is being undertaken for the Korean market.

One of the strategies proposed in that research report was to 'decouple' Australian prime grass fed from Australian standard grass fed in the Japanese market. The prime grass fed involves short term grain feeding and more tightly specified production in terms of age, fat and meat colour, marbling and weight. In conjunction with potential changes in consumer tastes and demand for more consistent quality, these changes have implications for beef production, processing and grading systems in Australia. At the farm level these changes imply a change to producing beef for different, and more tightly specified, markets or products. One area of concern in the future is whether changing to new market specifications is likely to be profitable at the farm level, in comparison with existing beef production systems. The question of relative profitability is very important for beef producers.

This question also has implications for beef feedlots and meat processors in terms of what prices might be required to attract beef producers to change systems. While these matters would normally be left to the market place to determine, this issue has been subjected to more detailed research because time is of the essence in the business of accessing the new markets before Australia's international competitors. The MRC has a major program under way looking at different aspects of how the beef industry can adapt to the new Japanese and Korean markets. One project within the Japan/Korea Market Key Program is specifically aimed at comparing the economic returns from existing and new market specifications of beef enterprises at the farm level throughout Australia. This document reports the results of the economic study.