Murmurings within the Wagyu supply chain confirm that previous excitement about prices has now led to an tsunami of supply, with the result that feedlots are increasingly selective on what lines they will commit to preparation for a premium market.
How much extra supply would have to come through the pipeline in order to put downward pressure on premiums is very much an unknown at the moment.
But this year has delivered a reality check with full blood Wagyu falling from 700 cents per kilogram to 600c/kg, with buyers paying substantially lower prices for grass fed Wagyu heifers out of the saleyards.
“It’s not panic stations yet, but there is growth in supply,” reported Matt Dalgleish, Mercado. “Premiums have eased but they are still within normal levels when you look back over five years.”
“Normal” is 65-105 per cent above the EYCI for lighter Wagyu cross cattle in the 200-400kg weight range. The year 2016 produced an 85 per cent average while 2017 slipped to just below 75 per cent higher than EYCI.
In saying that, first cross cattle with less than quality genetics will be discounted. That is the risk.
“Agriculture goes in cycles,” says Jerome Hayden, of Australian Wagyu Beef Network, who supplies full blood and first cross Wagyu to China, Japan, Israel and a bit to South Africa.
An early adopter of the industry, Mr Hayden started with Wagyu in 1990 when a handful of players controlled production and marketing.
The network now runs cattle on 4500 hectares of leased country across six properties in Queensland, including Longreach, Hughenden, Roma, Springsure, Dalby and Claremont. It owns a quarantine centre at Toowoomba and ships live every five weeks out of Portland Victoria direct to China.
“We have to ask the question what is a sustainable price and when as producers are we going to learn? At last year’s pricing structure feedlot returns were not sustainable.
“Who can pay 650c/kg for a first cross at 450kg and put in on feed for 400 days at $3.80 per day? Breeders must have empathy for the feedlotter if the Wagyu trade is to continue. With the Australian dollar the way it is those cattle have to grow pretty well for feedlotters to make a return.
“Breeders need to yard wean and teach their calves to eat so when they go into a feedlot they don’t have their heads in the air or have an attitude problem.
“In a bad season you can have set back,” said Mr Hayden. “It is critical that we get 0.7-0.8 kilograms per day growth and for that we need the right females.
“It’s an intense job and we need the right suppliers and feedlotters so the whole process can succeed.”
New markets key to this breed’s prosperity
Queensland Wagyu breeder, Jim Jones, Black Gold Farms, Ayr, is confident that increasing demand for sires from northern Brahman breeders will grow, providing another market platform for the desired animal.
“Wagyu is a fertile animal and it is quiet and tough. It can stand drought. It is a very hardy animal compared to other Bos taurus,” said the breeder who recently bought the best Angus heifers out of Tenterfield to use as embryo recipients.
“The northern Brahman herd has gone through a lot of drought and is having trouble with fertility. The Wagyu- Brahman cross is proven to deliver a lot more calves and that in itself is worth money. More animals on the ground equal more beef.”
Meanwhile, NSW Department of Primary Industries project manager, Ryoko Uchida, from the Australian Wagyu Export Capability Development Program, said overseas demand continued to increase.
“It is vital for producers to understand international markets and their requirements, as it will help them to have clearer breeding plans that specifically match product to the markets,” she said.
“A key element of our program helps producers develop and improve the business culture, skills and knowledge required for trade with Shanghai and Taipei. It provides valuable opportunities to learn about the market and import requirements from different perspectives, and allowes participants to expand their networks.”
Mainland China was the fourth highest value export market for Australian beef to the value of $832 million in 2017 while Taiwan was a steady importer of Australian Wagyu and constantly looked for new suppliers.
Ms Uchida said Australian Wagyu held a unique position with a globally well-known premium brand and further growth expected.
