CLEAR pricing signals that align carcase attributes that meet consumer expectations to producer returns is seen by many in the cattle and sheep business as the way to extract the most from growing global demand for red meat.
It's called value based marketing and big strides are being made down that pathway, not-the-least of which has been the launch this year of a world-first lamb grid paying producers on lean meat yield, weight and intramuscular fat.
NSW's Gundagai Meat Processors has offered a 50 cents-a-kilogram premium for lambs with an intramuscular fat measurement of 5 per cent or higher.
GMP's chief executive officer Will Barton believes the combination of objective measurement of carcase lean meat yield and eating quality will provide identification of the best lamb genetics and effectively revolutionise the industry.
Together, they allow the introduction of a value-based payment system which will send clear price signals to producers about the most profitable sheepmeat genetics, he said.
Many industry leaders have long argued payment for livestock based on the value of meat cuts, measured objectively, holds the key to the integrity of red meat products and Australia's competitiveness in the global market.
Large programs of research and development work are underway on technology and methods that allow for objectively measuring quality and yield both on and off farm.
Much of that is expected to drive VBM, although Australian Meat Industry Council chief executive officer Patrick Hutchinson makes the point the technology will be utilised in many different ways.
"Processors will use it in the methods that best suit their individual businesses - internally to build in cost efficiencies or externally by influencing supply to pay on performance for particular supply chains," he said.
"The great benefit of this innovation is the flexibility it offers.
"But certainly it will allow meat companies to differentiate and to underpin brands and claims about products.
"The end game is total carcase value, which enables us to build margins and maintain consistent livestock prices. That's where future prosperity will come from.
"Building stability into supply chains and removing the volatility of extreme peaks and troughs in markets is what our strategies should centre around, whether it's value based marketing, negotiating free trade agreements or biosecurity."
Sheep Producers Australia supports the evolution of sheep meat industry value chains to support objective measurement technologies at chain speed.
That would mean consumers can be guaranteed a quality product, producers can adjust their ram selection for a balance between yield and eating quality and processors can optimise boning, target specific markets, and potentially reward producers, according to chief executive officer Stephen Crisp.
"We are currently looking to rebuild a flock, and if we can build a better flock in the process, that can only be good for future returns and the sustainability of the sheep industry," he said.
No to a regulated price
Big domestic and export processor Teys Australia is one of those leading the work to build VBM into the industry.
Corporate and industry affairs manager John Langbridge said working collaboratively on producing the different product attributes for which end customers are willing to pay a premium was the way forward, not market regulation.
Australian Competition and Consumer Commission Agricultural Commissioner Mick Keogh has also recognised that.
"Processors and retailers are increasingly dealing directly with farmers to ensure consistent supply of higher value products and bypass the more traditional agricultural markets and the public price discovery systems associated with those," he said.
"In doing so they are using more and more complex pricing systems that target very specific product qualities and characteristics."
According to Mr Langbridge, in the case of red meat these pricing models factor in the numerous commercial drivers unique to each supply chain, for example domestic versus export.
They were complex and not conducive to regulation, he said.
"A regulated price structure covering a supply chain as complex and diverse as the Australian red meat supply chain runs the very real risk of diluting collaborative relationships and therefore decreasing the value of current brands," he said.
"It would be impossible for any regulated price structure to consider the varying consumer trends that influence the value of the product across so many different markets.
"How would it be possible for a regulated price structure deal with an Argentinian president seeking re-election who with no notice stops all Argentinian beef exports, or the fluctuating political relationship between Australia and China, or even fluctuating international currency exchange rates?"
The story Red meat makes big strides down the value based marketing path first appeared on Queensland Country Life.