Price hike coming to Aussie supermarkets as meat prices surge

There’s a really weird reason why Aussie supermarkets will see a “volatile” change over the next few months and it will impact us all.

Hold the barbie Australia. Woolworths CEO is warning of meat price inflation in 2021, with beef in particular likely to cost more.

“We do expect to see continued meat price increases,” Woolworths CEO Brad Banducci said last week, as he warned of “volatile” price movements across the world of groceries.

The big reason for pricey meat? Rain. The drought broke in 2020 in most of the country and it turns out that when the paddocks of Australia are lush and full of grass, beef farmers decide to keep their animals. Instead of packing them onto trucks, they let the cattle grow, expanding their herds. Veal gets a chance to turn into beef.

“A lot of cattle are being kept on the land,” Mr Banducci said.

As this next chart shows, it’s been a pretty good time to be a cow in Australia. Your chances of meeting your maker have been a lot lower.

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It’s a good year to be a cow. But not such a good year to be a burger lover.

According to the ABS, the number of cows being killed is down 24 per cent, and the amount of beef being produced is 18 per cent less. The cattle being sent to the abattoir are bigger because they’ve been given longer to get big.

“Improved seasonal conditions in southern Australia throughout 2020, and above-average summer rain in Northern Australia during the 2020–21 wet season, are expected to produce an abundance of pasture in all major cattle producing regions, with the exception of parts of WA,” Meat and Livestock Australia wrote in their 2021 Industry Projections report.

“The forecast fall in calf slaughter for 2021 is 7 per cent, reinforcing that the herd is entering a rebuild phase, and indicating producers will hold onto calves that otherwise would have been turn off as vealers.”

However, the report hints that when those cattle are ready to turn into meat, they could go offshore. Exports are expected to rebound in 2021 as world economies recover from COVID.

The lush paddocks are full of future steaks and future meat pies. For now that lack of supply means beef costs more.

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Cows in a paddock in north Queensland. Picture: Brendan Radke

Abundant rain is not all bad news, of course. Grain for grain-fed beef is costing less, which is good news if you like Wagyu. And because of excellent growing conditions, fruit and veg are entering what the Woolworths CEO calls “a more deflationary period”. That means lower prices in the fruit and vegetable section.

Turns out the expected labour shortages on farms weren’t enough to reduce supply of fruit and veg.

“In fruit we’ve managed to offset deflation with increased demand,” Mr Banducci said. “But that’s not so in vegetables.”

And the big rains should continue to mean cheap fruit and veg in 2021.

“We are expecting very large crops – for example on the fruit side in avocados across the country, including New Zealand,” he said.

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Avocados are due to drop in price which is good news for brunch lovers.

Avocados Australia CEO John Tyas confirmed we should expect lots of locally grown smashed avo this year, with lots of Aussie avocado orchards straining under the weight of their fruit.

“There should be plenty of Australian avocados available in 2021,” he said.

“Per capita, Australians are the highest avocado consumers in the English-speaking world, devouring 3.88kg per person per year.”

Holy Guacamole! 2021 could be the year of nachos. Just so long as you don’t want beef nachos.

Jason Murphy is an economist | @jasemurphy. He is the author of the book Incentivology.