Australia: Understanding the dynamics of the co-product market
Over the past 12 months, the prices of most co-products have experienced declines, primarily due to demand or supply factors. The decrease in sheep runners, for instance, can be attributed to supply, presenting new opportunities for butchers and sausage makers. Conversely, tallow prices have seen a decline due to various demand-related factors. This article will delve into the implications of these changes in co-product prices and what it means for industry.
Tallow serves various purposes, included use as a cooking oil, in hygiene and beauty products, and as a component in fuel. The reduction in global consumer spending and travel has led to a decrease in demand for tallow over the past 12 months. In December 2022, tallow prices hovered around $3,000/ tonne, but they have since fallen by over 30%, to below $1,300/ tonne. This decline in tallow prices has made it a more popular option as a cooking oil.
Sheep runners, commonly used as sausage casings, have dropped to $2/piece. This price aligns closely with what they fetched in 2020. The decline in runner prices is attributed to a significant increase in lamb and sheep slaughter numbers in recent years.
The reduction in sheep runners is expected to lower the cost of inputs for sausages. As consumers seek more economical meat cuts, the decrease in casing prices may make sausages a more appealing option if these price reductions are passed on to consumers.
Traditionally considered a secondary cut, skirt steak has begun to gain popularity and has appeared on both retail shelves and high-end restaurant menus. Currently priced at $8.20/kg, it remains consistent with its price in early 2020. This price reduction may lead consumers to favour it more amid cost-of-living pressures.
Interestingly, prices for tripe, liver, tail and tongue have increased over the past 12 months. This uptick could be attributed to a rise in the usage of secondary cuts both domestically and in export markets, as purchasing decisions are influenced by cost-of-living pressures.
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