As the mainstream beef industry flounders in the doldrums of oversupply, more producers are turning to organic production to shore up returns.
It’s hardly a mass movement: Australian Certified Organic reports that it has received 60 applications for organic certification over the past two years.
But this represents a 25 per cent jump in beef producer registrations, and the increase doesn’t seem to have changed the supply constraints the organic beef sector operates under.
For producers in low-input environments, organic certification requires little or no change to management, but holds out the prospect of reliably better returns after the three-year certification process.
Andrew Walker from Moonbong Partnership, a third generation family beef operation based at Tambo in Central West Queensland, applied for organic certification in November 2012.
“We don’t use buffalo fly spray – or hardly any other chemicals for that matter – when we finish the bullocks, so we thought we might as well be finishing them with organic status,” Mr Walker said.
“We decided to become organically certified because the returns are much more significant. We can expect to get 55 cents more per kilo for a two tooth bullock weighing 300-340 kilograms, from $3.55 that we currently receive to $4.10 with organic status.”
“Going organic” can be a viable risk-management strategy, in the eyes of Alister Ferguson, chief executive of the Arcadian Organic & Natural Meat Company.
Organic certification gives a producer the ability to sell into the organic market, but if that doesn’t suit them, the conventional market remains open to them.
Prices for organic beef haven’t wavered through the drought. That’s a reflection of the persistent supply constraints the organic beef business operates under; and that the sector has evolved into a handful of small, tightly controlled supply chains.
“We’re not waking up every day wondering whether we’re going to sell our meat, or where our cattle are coming from,” Mr Ferguson said.
“We keep it pretty tight. Supply and demand is a bit of a seesaw, and we just make sure everything has a home. Being a bit nichey allows us to do that.”
Arcardian Organics has been operating for 12 years. It supplies its domestic and export markets from a network of 45 producers, mainly in Queensland and northern NSW, who collectively carry more than 100,000 head of organic cattle.
“There is a lot of strength within the group. If one guy is dry and another is doing OK, we don’t want cattle falling out of the system, so we ask them to work it out between themselves.”
Asia and Middle East growth markets
OBE Organic, the Channel Country-based pioneer of rangelands organic beef, is steadily expanding its overseas footprint under the umbrella of surging Australian beef sales into Asia and the Middle East.
Dalene Wray, OBE’s Hong Kong-based manager, said the United States remains the most important market for the Australian organic beef sector, largely because it provides an outlet for manufacturing beef.
But the US market is relatively mature, and Asia and the Middle East are all about growth.
OBE is experiencing slow but sustainable growth in both regions, Ms Wray said, and that’s not counting China.
The company is yet to tackle China. It is a tumultuous and unpredictable market, and OBE doesn’t have the scale to lose money while it drives a wedge into the market.
Ms Wray said OBE is looking for a reliable partner through which it can broach China, but it is content to wait while the dragon is tamed by more affluent beef enterprises.
Supply is also an issue. The Channel Country is in deep drought, although at this time of the year demand for OBE product is also low. If the region gets summer rain, OBE producers will be ready to turn off cattle in 6-8 weeks.
Ms Wray is fulsome in her praise of MLA’s regional offices and their support to help brands like OBE penetrate these markets. She reserves particular warmth for the Dubai office and Middle East/North Africa regional manager Jamie Ferguson.
Australian beef’s recent surge in the Middle East was enabled by the quarantine bans of United States and Brazilian beef, but Ms Wray thinks Australia’s ability to take immediate advantage of the bans was greatly helped by the prior groundwork laid by MLA through the region.
By Matthew Cawood, Mathew is the national beef writer for Fairfax Agricultural Media