Double B Beef pays dividends for Managing Director

September 14, 2009

“I paid $25, received a bumper sticker and said “that’ll fix ‘em!”, David Palmer, Managing Director of Meat and Livestock Australia, said in reminiscing about joining Double B in 1984. He said he joined the organisation because he could see potential for educating himself and expanding his enterprise by doing so.

Twenty five years on, Mr Palmer said “the power of a group like this will exceed the sum of its parts.” He commented on the power of the group to analyse information, establish networks, liaise with people with expertise outside the group and to make use of them.

Benchmarking was an area that Mr Palmer mentioned as being a powerful tool, as well as a most confronting one. He said there is a huge divergence between like beef producers. According to MLA studies, the top 20% of cattle operations have a cost of production of 98 cents per kilogram whereas the bottom 20% has a cost of production of $2.56 per kilogram.

Mr Palmer noted that the real price of beef hasn’t changed much over the last 60 years, moving between $1.50 and $2.00 per kilo, with the only saving grace being the increase in productivity, which since 1953 has trebled.

In Australia, according to Mr Palmer, the beef industry needs to achieve a 2% productivity gain every year to remain viable. In northern Australia, this has been more achievable, given the influence of the “three Bs” being Brahmans, buffel (grass) and boats (live exports).

However, the challenge for producers to find ways to increase productivity in southern Australia is more difficult, but “find it we must”, he said. Mr Palmer challenged Double B members to come up with ideas for driving productivity. He said people place a lot of emphasis on the price received for stock, however the correlation between that and profitability is low. The cost of production versus the price received is the important equation.

Mr Palmer said 43% of the Australian land mass is occupied by the cattle industry. Much of this land is unsuitable for any other use. “It is irresponsible of us not to use that land for food production,” he said. Only 7% of our land mass is suitable for cropping. Livestock production is a very defensible enterprise which we must defend. Every week producers generate $220 million in beef sales.

Mr Palmer said “The climate change debate is not going to go away. It has been a very dishonest debate but we cannot ignore it.” Farmers must present themselves as no threat to society and must send the message that they can help with carbon sequestration far more effectively through land management, rather than just planting trees. Mr Palmer said that affluent societies will generate carbon and cattle and sheep have been unfairly singled out.

With less than 4% of Australians vegetarians, the beef industry needs to make use of that figure. Mr Palmer said that the beef industry will always be under scrutiny. The reality being that any industry running domesticated animals will draw activists. He asserted that according to MLA figures, 112 million kangaroos would be needed to replace beef and lamb in the Australian diet if the Garnaut report was accepted.

In talking about markets for beef, Mr Palmer said “Australia has a fabulous relationship with McDonald’s.” There are about 18,000 outlets around the world and Australian beef constitutes 80% of the ground beef sold through them.

Russia is now the world’s largest importer of meat and Mr Palmer was confident that it would re-enter the market soon, having withdrawn due to the global financial crisis.

“Beef and lamb go with money,” he said. Indonesia has a population of 230 million which is mostly Islamic and doesn’t eat pork. It is Australia’s fourth largest market.

Mr Palmer concluded by saying that the long term outlook for beef is that it has a great future, given that by 2030 the world will have to produce 50% more food than it does now. Increasing productivity is the key, he said. In the next 25 years, beef producers will need to look for new technologies and new ways of doing it faster, cheaper, better.