JBS Australia’s Mark Inglis.
AUSTRALIAN lamb producers have been told export processor JBS Australia lost direct supplies when it attempted to buy lambs via a market-focused 18-26kg grids.
At the 2017 BestWool BestLamb Conference in Bendigo last week, JBS farm assurance and supply chain manager Mark Inglis challenged whether lamb producers wanted carcase feedback to produce to market specifications.
JBS and other exporters have been criticised by producers over the conflicting market signal provided by the release of flat priced 18-32kg lamb grids while simultaneously seeking lambs within tighter weight specifications.
Mr Inglis showed conference delegates an anonymous JBS Farm Assurance supplier’s LDL feedback sheet for lambs supplied to the Cobram plant under an 18-26kg grid, with compliance rate of about 60pc.
“If you are producing Toyota Landcruisers and you have a 60pc compliance rate, how is your business going to be travelling? Pretty ordinary,” he said.
“And I know what you are thinking. We are part of the problem, as processors, there is no doubt we are part of the problem, because of the grids that we actually put out there.
“But there is an extra message to that,” he said.
We’ll collect the data, what will you do with it?
Mr Inglis said JBS sales managers consistently said Australian lambs were too heavy and too fat.
“But our grids at 18-32kg fat score 2-5, what does that encourage? Producers to go and produce something that is as heavy as possible, because dollars per head is where you get your best money.”
He said JBS put out an 18-26kg grid last year across all its supplier categories.
“What do you reckon happened to the lambs? They disappeared, and where did they go?
“Up to old mate up the road who has got a 16-36kg grid or they went back into the saleyards,” he said.
“So as an industry do you want feedback about what your customers want?
“I mean, it is quite confusing, because all the top-end producers they say ‘we want parameters, we want to know what the specs are’, but the majority of lamb producers, do they? I’m not quite sure.”
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Mr Inglis said the profitability its Cobram plant, based on lean meat yield and carcases weight, had been shown to drop off when lamb carcase weight approached 28-30kg, with a loss per head of up to $30. JBS most profitable lamb carcase weight range was 22-24kg for its current customer base.
He said the biggest thing that has been holding back the lamb industry – both processors and producers – “is around the actual quality of the feedback that we’ve been getting.”
He said with electronically identified lambs in Victoria, JBS’ Bordertown and Brooklyn plants will be able to give individual carcase feedback to producers and analyse it “in a meaningful and user-friendly way”.
“We are going to be collecting it, what are you going to do with it?”
Is the price discount for heavy lambs enough?
Mr Inglis said the drop off in price for over 26kg lambs on JBS grids was about 20-30c/kg.
“Is it enough? Probably not, based on the actual (Cobram) profitability slide I put up there.”
When asked why JBS had a relatively flat price grid of 18-32kg but didn’t want heavy lambs, Mr Inglis said if the company put out a differential price grid favouring 18-26kg, the company will lose supply.
He said JBS had closed its Brooklyn and Longford plants for lamb, based on supply and price.
“If we put an 18-26kg grid out there, where are they going to go?
“If producers don’t want or if producers aren’t prepared to supply into that 18-26kg grid and they want less risk, what do they do?
“Put them in the saleyards or march up the road to someone else who has got a 16-36kg grid.”
Longford had highest grid compliance rate
Mr Inglis said JBS benchmarked its producers on grid compliance and encouraged them to get at least over 80pc, but showed producers were supplying within a compliance range of 5.8-97.6pc. The main reasons for being out of compliance were excessive fat and weight.
Mr Inglis said two weeks JBS southern livestock manager Steve Chapman reported that 5200 lambs killed at Brooklyn one day averaged 24kg carcase weight, but one lot of 260 lambs averaged 36kg.
“He said I’m expecting a phone call from our production team to rip me a new one. What are we going to do?
“He (Steve Chapman) always states – ‘We are not processing Coke cans here, we know it, but we need to get as close to it as we can.”
Mr Inglis said at Cobram in 2016, the overall compliance rate to the 18-26kg 2-4 score grid was 63.6pc, at Bordertown it was 68 and at Longford it was 87pc, which he attributed to genetics.
“Cobram’s average lean meat yield was around 56pc.”
Mr Inglis said data analysis showed the JBS compliance rate for saleyard purchases to an 18-26kg grid was 57pc, and to an 18-32kg grid, was 81pc. He admitted that numbers motivated buyers because they had an order to fill, but they only had a split second to assess lambs. The company was now benchmarking buyers to give them feedback on compliance.
Where is the 30-kg plus lamb market specification?
Mr Inglis said 45 percent of Australian lambs go into the domestic market, which traditionally sought 18-22kg fat score 2-3 carcases, while the export market is 55pc of demand “and growing”. He said the Middle Eastern ‘bag lamb’ market — 16-18kg fat score 1 and 2 – paid a premium for lean animals. In ME supermarkets he had seen Pakistani mutton retailing for $4-$5/kg more than the Australian lamb, alongside New Zealand lamb and Indian product.
“And the New Zealand was more than what the Australian lamb was.”
Mr Inglis said although the perception of heavy lamb in the Australian industry was around 30kg carcase weight, the carcase specification for the largest buyer of Australian lamb on the American market, Costco, was 18-26kg.
“So where the hell did this 30kg-plus lamb come from as far as a market spec?
He said the JBS Farm Assurance program was set up for the European Union market, but JBS’ commercial director in its London office Friboi Marcus O’Sullivan would be telling a Sheepmeat Council of Australia delegation in the UK that the lambs being produced for the market were “too heavy and too fat.”
“Do you even know or do you just let the saleyard decide it for you, or are the lines becoming blurred?
“As supply shortens up – what happens?” he said.
“We have to then fill our hooks with lambs that we would not necessarily take.”
“It’s not just us, it is other processors as well and other chains.”
“That has certainly been happening in probably the last 6-8 months.”
Mr Inglis said buyers who traditionally would not buy anything over 24-26kg, were starting to get into the heavier market.
Overweight lambs is not just a issue for the Australian sheep industry. Our contemporaries in the United States have a similar problem each year with ‘lambs’ finished in feedlots that can end up in excess of 90kg live weight, driving away customers and driving down processor prices. They are colloquially known as ‘gorillas’. There was a good article about these super-sized lambs — a result of the US sheep meat classification system — on February 16 2016 titled ‘Age Weighs Heavy for American Lamb’ on The Sheep Site.
Well, the Ballarat saleyards dictated prices; with the spud growers buying those good 18-26kg lambs and putting them on the lucerne for eight weeks, to make $100-plus on the over 30kg finished lambs. They also helped the 18-26kg producers by giving the processor’s competition when purchasing. The last time we got these prices the big skins were making $30-$40.
Some good points Craig Hinchliffe. Industry is moving in the right direction with the first stage of objective carcase measurements (OCM) through the investment in DEXA. But it’s only the first widget. We need chain-speed eating quality (EQ) measurements for intra-muscular fat (IMF) and then to link it all together with hook tracking. A collaborative co-investment by leveraging producers’ levies, combined with processors, will see OCM create clear transparent signals about quality and processing efficiency that can then be linked back to my farm gate price. It’s baby steps, but we will get there and then the things that Peter Small is talking about can be proven with hard data. Perhaps the Merino does have better eating quality.
Craig, a well-considered and thoughtful response. Should producers be focusing on returns ‘per unit of production’? Is dollars per hectare or dollars per capital invested more important? Do we know if the genetics we are using produce leaner, sweeter or tastier lamb?
I was recently on a farm in France and talked to some Middle Eastern guys who were farm slaughtering some French Merino lambs. They told me they liked these sheep, because lambs with longer legs were sweeter. Later I joined in a meal of roast lamb and yes, the meat was sweet, succulent and lean; like the lamb I ate in my youth.
As a lamb producer, I welcome all discussion on feedback mechanisms that work towards an objective of mutual profitability for processors and farmers. The narrative of this article, however, leaves me wondering whether there are some cross-purposes at play.
From a behavioural change perspective, market signals such as grids with significant premiums for meeting target specification should be the hallmark of the sheep meat industry. Undermining the sentiment expressed by Mr Inglis; however, are industry grids that are broad-based and processor feedback sheets that aren’t based on agreed and transparent objective carcase measurement. Alas, producers understandably focus on returns per unit of production, because this is the only ‘objective’ feedback on offer at the moment.
I look forward to a future where detailed and objective individual carcase feedback from processors to producers is the defining point of difference between the Australian lamb industry and our international competitors. The sooner our industry achieves this outcome, the sooner we will be able to leverage enabling technologies and genetics to achieve fully traceable nutrition and taste profiles that different premium market segments require. The pathway to this future; however, will occasionally be obstructed by industry actors that ‘talk the good talk’, for undeclared marketing or political positioning purposes, while resisting the transition to transparency and pricing accountability.
The future of our industry requires enhanced processor-producer partnerships and the quality of feedback mechanisms will be key to this outcome. Let’s see who can actually ‘walk the talk’.
I’m surprised that the excellent commentary by Mark Inglis has failed to attract any lamb producer response. Is anyone concerned? Are our lambs too heavy? Are we supplying lambs within a grid to market needs? Are our lambs producing too higher percentage of fat?
One thing we should know is the traditional influence of the Merino on the prime lamb mother to produce leanness and sweetness in the meat flavour. Is the reduced influence of the Merino resulting in fatter carcases with less flavour?
Excellent market feedback to our industry. Thank you Mark Inglis. May I urge my fellow lamb producers to heed these market concerns.