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All news / Global beef demand is robust, says JBS Five Rivers boss

  • 20 Oct 2016, 12:24

FROM the pressure being placed on production systems by ‘treehouse living hipsters’ to the breaking down of barriers in once dominated lucrative export markets, many of the challenges faced by Australia’s beef industry are shared by our United States counterparts.

The same opportunities, too, are there for all and they are significant - a forecast nine billion plus global customers by 2050, all consuming increased volumes of animal protein and most wanting choice.

This was the message from Mike Thoren, the head of the world’s largest cattle feeder, JBS Five Rivers Feeding, who was a headline act at the Australian Lot Feeders Association 2016 BeefEx conference, held in southern Queensland last week.

With 12 facilities across seven states, 700 team members and a combined feeding capacity of one million head, Five Rivers has almost double the capacity of its nearest competitor.

While the scale of the US cattle game and outfits like Five Rivers might be eye-opening for Australian producers, the bad-times-following-good-times nature of the business is extremely  recognisable.

“You guys are in the height of your glory,” Mr Thoren said.

“We felt this not long ago. From the end of 2013 through to the start of 2015 we had record profits.

“Now we are losing $200 a head a day.

“As they say in Game of Thrones - winter is coming.”

Judging from Mr Thoren’s address, Five Rivers is positioning itself in the global beef supply chain by taking a long-term, big picture view.

The current playing field presents a robust picture of global demand, he said.

An expected 4.9b middle class beef customers by 2030 and continuing increased consumption of animal protein.

The 1pc ‘vocal radical’ challenging the industry were influencing those numbers, he said.

Mr Thoren spoke about how that group was putting pressure on retailers, who in turn react by making sustainability demands on their immediate supplier.

The producer and feeder are the focus of many supply chain demands and packers sit between the retailer and them, he said.

“One thing I challenge is as a society why do we allow this vocal one per cent to leverage their beliefs on the emerging middle class,” Mr Thoren said.

“This is beyond the scope of our industry, it is something for all of society to address.”

The US herd hit a drought-fuelled multi decade low two years ago before the rebuild kicked in, taking cattle numbers to a five-year high of 92 million early this year.

Mr Thoren presented United States Department of Agriculture beef cow inventory figures which show just over 29m head in 2015 has risen to 31m this year, and there is a projected extra 750,000 to come next year and further 300,000 the following year.

Nearly half - 47pc - of the US herd are Angus, while Herefords make up the next largest number, then Simmentals.

Focus on grain fed

The US is focussed on grain fed production.

“It doesn’t just taste better, it allows us a lot of production,” Mr Thoren said.

His USDA figures showed the US sits at the top globally in terms of pound of beef produced per per brood cow at around 630 pounds of carcase annually. Canada is second at just over the 600 mark, Australia is further down the list at just over 300 and the world average is just under 300.

“Basically all of US beef goes through the feedlot at some point,” Mr Thoren said.

A SWOT (strengths, weaknesses, opportunities and threats) analysis of the US fed beef industry showed many similarities with Australia, but a few notable divergences.

“The US is a low cost beef producer - we are the number one corn producer and number three wheat producer, we have abundant skilled labour, sophisticated financial structures, the opportunity to hedge cattle and value your inventory and therefore high financial leverage, we are blessed with good genetics and good infrastructure,” Mr Thoren said.

“But we are an expensive protein relative to poultry and pork - our beef costs three times that of our chicken.

“And on image, we are in a worst spot than Australia.

“Treehouse-living hipsters are challenging us and we have not mounted an effective defense.

“We have a noble business but we haven’t done a good job of portraying ourselves.

“We also lack a national identification system - Australia has been progressive on this and I applaud you all.”

While JBS is more exported focussed than most, the US only sends 10pc of its production overseas.

This is where the big opportunities lay, Mr Thoren believes.

On the threat front, regulatory pressure, market access and changing demographics and views about work life balance were some of the common threads between the two countries.

JBS is actively dealing with the labour challenge.

“We are changing production processes to take the business  to a five day a week operation, increasing emphasis on recruiting specific people and moving technology forward,” Mr Thoren said.

It is addressing the customer through differentiation and branding  - the latest launch being Aspen Ridge, a hormone-free, naturally raised Angus beef - and by opening feedlots to tours in a bid to interface with the general public.

This was having a real and positive impact on people’s perspective of feedlotting, Mr Thoren said.

On the issue of the US facing the potential to bump up against slaughter capacity, Mr Thoren said JBS was not afraid to let occupancy levels drop, had instigated a greater focus on yearlings and calves and was continuing to buy more cattle direct from the rancher.

On the need to protect productivity technologies, Mr Thoren said JBS strived to provide customers with choice but “we make it clear that production technology employed by the industry is safe.”

“It is incredible the number of different consumer requests we receive but when you get down to the costs of taking productivity tools out, there is generally not the willingness to pay,” he said.