What is the Angus Premium and What is it worth?

July 10, 2019 2:56 pm

The trend among emerging Asian markets like China towards seeking higher quality meat as their economies mature will serve to underpin premiums for Australian Angus cattle in the future, delegates attending the 2019 Angus Australia annual heard. 

Robert Hermann, head of Ruralco’s markets intelligence service provider Mecardo, provided a summary of current price premiums for Angus cattle during the conference, and where they might go in future. 

While there had been some fluctuation, he suggested Angus cattle premiums had averaged 25c/kg since mid-2015. 

“We’re in a really fortunate position in the Australian beef industry. We have this massive, and growing population to our north, with half the world’s population in our vicinity,” he said. 

“And as they get richer, the tendency is to eat more beef. In China, households earning $35,000 or more are expected to double over the next four years. History has shown that when countries transition from third-world to first-world economic status, they consume more protein, fats and carbs.” 

“Now we have these big populations in Asia moving in that direction. That’s a real positive,” Mr Hermann said. “These export markets are absolutely the future of our industry in Australia.” 

He said the big difference (in livestock value) between the current drought circumstances and the 1970s droughts was the current high beef demand from export markets which was supporting livestock pricing. 

Using China as an example, Mr Hermann pointed out the growth that had been seen into China in the first quarter this year, relative to mature markets like Japan and Korea. 

Especially evident has been the growth in chilled (proxy for quality) over frozen exports. Australian chilled beef exports to China for the year to April reached almost 6400 tonnes, up 160pc or almost 4000t on the same four months last year. 

“That huge population in China is getting to know that Australia has quality meat,” Mr Hermann said. 

“They are becoming aware that we have not only a base-level beef protein, but that we also have quality meat, and Angus fits into that category. It took China less than a decade to match South Korean import volumes out of Australia, and when coupled with the growth in population and annual income, we have someone on our doorstep, banging away, saying give us some product.” 

25c/kg premium evident for Angus 

In seeking to measure Angus premiums, Mecardo uses AuctionsPlus trading as the best measurement of breed performance for price. 

“It’s really the only sale channel where the breed is recorded accurately, against prices,” he said. 

Comparing 100pc Angus genetics cattle (steers and heifers 200-400kg liveweight) against other cattle with no Angus content on AuctionsPlus since 2015, Mecardo found the Angus premium averaged 25c/kg liveweight. 

For 70 percent of the period since July 2015 (brown panel in the graph published here), the Angus premium had been between 12c/kg and 38c/kg liveweight. 

“In percentage terms, the average Angus premium has averaged 8pc for those same cattle, and for most of the time has ranged between 5pc and 13pc,” he said. 

“Whether you view this as a discount for other breeds or a premium for Angus, it’s nice to be where the breed currently sits.” 

By Jon Condon, Beef Central