Cheeky offal price rises keep co-product returns at historical highs

Thick-cut,Gyutan,(sliced,Beef,Tongue)

Co-products are a key profit margin indicator for processors, especially when inputs are as high as they currently are, and luckily for the processors they are continuing to offer strong returns in many categories. Using a 500kg liveweight cow as our starting point, most recent price data has co-products returning $328.67 per head in September. This price has only been surpassed once in the past two decades, and that was two months ago in July.

Cheekmeat reached a record price of $13.50/kg in September, a rise of $2.50/kg on the previous month, and up 38% year-on-year. Meat and Livestock Australia reports that increased popularity of this product (which is traditionally sent mainly to Japan and South Korea) on the domestic market has been boosting prices. Also averaging a new price high was omasum (stomach tripe used for cooking in Asia and the Middle East), which rose 3¢/kg on the previous month to $8.50, a record return and a 12% increase on the same month in 2021.

Halal products continue to demand a premium, with Halal kidneys up 12% on the previous month and nearly 46% year-on-year, and Halal omasum averaging $1.70 more than non-Halal omasum, up 53% year-on-year. Thickskirt is up 28% compared to the same time last year, while Halal thickskirt has risen 30% and is selling at 23¢/kg more than non-Halal. While some of the strength has come out of the heart and tongue market from when they reached record highs last year, those prices are still historically strong.

Foetal blood, used in pharmaceuticals, dropped in price ever so slightly in September, but at 615¢/kg is tracking at its equal second-highest value on record, and about 5% above year-ago levels. Tallow, which is in demand in the US and Singapore for biofuel production, followed a similar trend, falling slightly month on month, but more than 16% up on the same time last year at $2,436/tonne.

These high prices – and lower Australian supply – has impacted export volumes of co-product however, with only 47,162 tonnes having been shipped offshore so far this year. This is 17% lower then the volume exported for the year-to-July in 2021, and less then half (47%) of the volume exported in 2019, when co-product exports reached their peak.

What does it mean?

Looking at the total average return per head, increased co-product prices have improved by nearly 10% – or $30/head – in the past 12 months. This equation doesn’t include foetal blood, which obviously is only available in select animals and adds a significant premium to co-product returns.  This will be going someway to offsetting continued high inputs and young cattle prices for processors, but on the other hand could be pricing some importers out of the market, and contributing to lower export volumes.

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Key Points

  • Total co-product returns remain firm, returning $328 per cow in September.
  • Cheekmeat and Omasum prices have reached record returns, while Tallow and Foetal Blood have maintained their historical highs.
  • Co-product export volumes for the year so far are at their lowest point since at least 200

Click on figure to expand

Click on figure to expand

Data sources: MLA, Mecardo, Steiner Consulting Group

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