Why we are paying so much for meat when beef is so cheap

Right now, with scotch fillet and sirloin sitting around the $50 a kilogram mark while steer prices hover below the $3/kg mark, the gap between price tags on supermarket shelves versus the saleyard seems dreadfully wide.

This is why the subject appears to have overtaken the weather as the main point of conversation.

But there's far more to this discussion than throwaway lines about farmers and consumers both being cheated, and that is starting to concern some.

They fear accusations of retailer gouging and beef being overpriced has the potential to both drive a wedge between different parts of the supply chain and create in the consumer's mind the idea that they are being ripped off and should stay away from beef.

There's no question cattle prices have plummeted this year. They are now 40 per cent lower than where they were this time last year.

Analysts and industry leaders have put forward a swag of reasons for that but in a nutshell, the frenzy of the herd rebuild on the back of a run of good seasons has eased and stronger supply is now consistently coming through.

Cattle prices, however, are still above long-term averages in many categories.

Retail prices also shot up during the same period as the cattle market was skyrocketing, partly because of the price of stock but for numerous other reasons as well. The pandemic, for example, threw a real spanner in the works in terms of consumer demand. Mince shelves were empty at times, and butchers even started making mince from rump.

The latest Consumer Price Index data shows beef retail prices are starting to come back, although they are still historically high.

Supermarkets have realised that regardless of the increasing prices, consumers are still willing to spend the same amount on red meat each week, even if they are getting less bang for the buck.

That means high red meat prices are unlikely to change until consumers change their habits.

The discrepancy between retail and farm red meat prices has many producers screaming for more transparency from both processors and retailers, with suggestions now doing the rounds that the Australian Competition and Consumer Commission needs to take a look at the situation.

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Meat & Livestock Australia's managing director Jason Strong said this was always an emotive discussion.

"Most commonly we see it in environments like now, where cattle prices drop quickly and the retail price is still high," he said.

Mr Strong said the dynamics driving live cattle prices were not the same dynamics driving retail prices.

When the cattle market shot up, the retail price also went up but definitely not at the same rate, he said.

"The flip side is when they've come down, retail prices haven't come down at the same point," Mr Strong said.

The price of mince and sausages has eased far more than steaks. Mince this week is selling at major supermarkets for just $7 for regular 17 per cent fat perfect-for-bolognese 500 gram packs.

This has prompted many producers to question whether high-end steaks are now a luxury item beyond the reach of the average consumer. They're also asking what that will mean for longer-term consumption rates and the overall profitability of the business.

Mr Strong said that was not a risk.

"There has always been a big differential between the highest value less common cuts and the more economical ones," he said.

"The highest quality steaks are only 18pc of the carcass.

"We do see people trade in and out of menu items when cost of living pressures hit, as they are now.

"Our opportunity is to consistently produce a quality product so that as they pay more for it, they still see value in it.

"If price is the only thing that drives the value assessment, then there is an issue with price going up but if part of the equation is how fantastic beef is, it's not such an issue."