Beef supply chain costs
We often hear beef producers complaining about the price of beef in the shops compared to the price they receive on sale to the abattoir.
The costs involved in getting beef from paddock to shop counter are outlined in Tables A–C. These tables show how beef from a 500kg live animal, sold to the abattoir at $3/kg for the hot carcase, will end up retailing for an average of $11.28/kg just to cover costs.
While the prices and costs shown were compiled in 2009 for a small retail butcher shop, the breakdown of where the main costs are is similar. Bigger butcher shops will have better cost structures due to higher throughput.
Table A shows costs in the abattoir, which include costs per kg for some processes as well as the impact that reducing kilograms have on cost. Table B expands on overhead and opportunity costs involved in operating a butcher shop. Table C shows how these costs and processes affect the final average price that must be recouped just to cover costs.
However, up to 40% of over-the-counter sales (mince, sausages, etc) retail for less than the average cost of $11.28. This means the butcher must cover costs and extract the profit margin from the more expensive ‘sweet cuts’.
Table A. Abattoir costs and processes
| Process | Notes | kg of beef | Value total | Value per kg |
|---|---|---|---|---|
| Dressing rate | 53% dressing rate on a 500 kg live animal yields a 265 kg hot carcase | 265 | $795 | $3.00 |
| Slaughter charge | Costs $70 | 265 | $865 | $3.26 |
| Shrinkage | Yields 97% after 3% shinkage from hot weight to cold weight | 257 | $865 | $3.37 |
| Boning out | Costs 40c/kg (before boning)
Yields 68% (after boning) |
175 | $968 | $5.53 |
| Delivery to shop | Costs 20c/kg | 175 | $1,003 | $5.73 |
Table B. Butcher shop costs
| Butcher shop overhead costs per week | |
|---|---|
| Wages for three staff | $3,600 |
| Rent | $600 |
| Power | $250 |
| Dry goods and supplies | $1,500 |
| Total weekly overheads | $5,950 |
| Opportunity cost per week (on $300,000 fit out at 10% per year) | $577 |
| Total weekly overheads plus opportunity costs | $6,527 |
| Butcher shop throughput per week | |
| 4 cattle | 1,000kg |
| 4 pigs | 240kg |
| 12 lambs | 240kg |
| Carton of beef | 200kg |
| Subtotal of weekly throughput | 1,680kg |
| Less trim and wastage factor of 30% | –504kg |
| Product sold | 1,176kg |
| Butcher shop costs per kilo of meat sold | |
| Total weekly overheads plus opportunity cost | $6,527 |
| Product sold | 1,176kg |
| Cost of product sold | $5.55/kg |
Table C. Retail sales price to recoup costs
| Cost | |
|---|---|
| Cost per kg on delivery from abattoir | $5.73 |
| Cost per kg in butcher shop | $5.55 |
| Retail cost (average) per kg to cover costs | $11.28 |
Further information
- Live assessing to meet market specifications – this article includes information on how to estimate dressing percentages, assess fatness, muscling and saleable meat yield (SMY).
- Saleable meat yield – examples from north Queensland
- Bernie English, Department of Agriculture and Fisheries
Bernie English, Department of Agriculture and Fisheries, and Chris Greenwood, Morganbury Meats.