Rabobank Report: Time will tell if consumers willing to pay more for Australia’s carbon-neutral beef products

The next year will test consumers’ willingness and ability to pay a premium for carbon-neutral beef amid economy-wide inflation, according to a leading agribusiness bank. In Rabobank’s latest global Beef Quarterly report, senior animal proteins analyst Angus Gidley-Baird said time would tell whether the market could support a further lift in beef prices as “first-mover” companies release climate-neutral beef products on to shelves. “We are starting to see positioning of low-emission and climate-neutral beef products on shelves around the world,” he said. “But it is not an easy time to translate sustainability and emission commitments into action with consumers around the world paying more for beef now than at any previous time in history.” Mr Gidley-Baird believed the full cost of production — sustainability initiatives aside — was not being passed on to consumers and the first signs of softening consumer confidence were already apparent in most markets. “Consumers’ willingness and ability to pay is likely to be tested in 2022 as inflation levels climb around the world,” he said. He said a downward adjustment of cattle prices and upstream input costs would be needed to restore processor margins and maintain beef’s competitiveness. Substantial rain in Australia’s cattle regions has provided support to the market, Mr Gidley-Baird said, which may allow enough pasture growth to encourage producers to hold or pick up more cattle. The report states while Australian cattle supply was increasing, the favourable seasonal conditions were enough to maintain producer restocking demand. “While we believe prices will drift down for the remainder of the year, the good seasonal conditions may mean prices remain relatively static into Q3 before producers reassess their buying appetite as summer approaches,” Mr Gidley-Baird said. Australian cattle slaughter numbers plunged in Q1 to their lowest level in more than 35 years, as processing plants battled labour shortages, with production volumes remaining constrained. The report notes Australia’s biosecurity was on high alert following reports of lumpy skin disease and foot-and-mouth disease in Indonesia, which had potential impacts on cattle productivity and trade implications.