Woolies, Coles drop winter retail prices on beef items – do cattle contracts follow suit?

NATIONAL supermarket operators Woolworths and Coles have lowered prices on a small selection of popular beef items, effective from winter’s official start on Saturday.

However beef items are only thinly represented among hundreds of grocery and fresh food items listed for reductions by both retailers.

Coles’ ‘Down Down’ campaign and Woolworths’ equivalent ‘Prices Dropped’ campaign have both committed to the price reductions for three months. In Woolworths case, it has listed just two beef items among 450 ‘staples’ being reduced until the end of August.

It’s not unusual for Coles and Woolworths to discount a selection of items each year at the start of winter.
Coles’ beef items included in the latest price reduction campaign include blade roast down to $13/kg from $15/kg (down 13pc). Cheaper pork and chicken items are more numerous among proteins on the list. Coles has also listed a series of other shorter-term specials running until 25 June including just one beef item: three-star beef mince 1kg packs reduced from $11 to $9/kg (down 18pc).

In Woolworths case, it has reduced the price of corned beef silverside (was $10/kg, now $8/kg – down 20pc) and beef chuck steak (was $17.50/kg, now $15/kg – down 14pc). In both examples, the company claims the prices are the lowest seen since November 2020.

In March, Woolworths announced a separate series of discounts, including Heart SmartBeef stir fry 500g packs reduced from $12/kg to $10 (effectively, $20/kg – down 16pc), and beef meatballs 400g packs dropping from $8 to $6 or the equivalent of $15/kg (-25pc). Both were due to finish on 28 May. https://www.beefcentral.com/trade/two-red-meat-items-in-woolworths-latest-round-of-retail-prices-cuts/

“Coles is attempting to provide value to customers through the winter months by lowering the price of hundreds of essentials in-store and online to help Aussies save,” the company said in a statement.

“Customers can save on pantry staples and roasting meats perfect for the cooler weather with more than 200 products across the store.”

Coles’ chief commercial officer Anna Croft said her company was committed to providing value across the products it knew customers loved to buy and cook through the winter months.

In a similar strategy, Woolworths late last week announced  drops on more than 450 ‘winter essentials’ by an average 20pc for the next three months as part of its Prices Dropped for Winter program.

“The seasonal Prices Dropped program has been running for a number of years and each season Woolworths reveals a new range of products that will be dropped in price to help customers better manage their budgets,” the company’s statement said.

“With meat often being the centrepiece of hearty winter meals, a number of fresh proteins have been included in the program, with some items being dropped to their lowest price in nearly four years.”

Woolworths chief commercial officer Paul Harker said the company understood the pressures customers were under and the need to budget for hearty, warming meals, and grocery essentials for their families.

“Our Prices Dropped for Winter program is designed to give our customers certainty on the key products they’ll be buying this season to help their budgets go further,” he said.

Meat prices edging lower

Monthly Consumer Price Index indicators for April released last week showed that the Meat & Seafood category was the only one to post a deflationary trend on an annual basis. Compared to the average indicator for 2023, the April 2024 indicator for meat & seafood prices was 1.2pc cheaper. Other reported categories including fruit & veg, dairy, bakery and alcohol were still showing an inflationary cycle on an annual basis.

On a month-to-month basis, the picture was little different. Price changes from March 2024 to April 2024 showed the Meat & Seafood category lifted by 0.6pc, and Fruit & Veg up 3.9pc over March. Bread and dairy were little changed.

Forward contracts above 700c/kg

Woolworths and Coles beef cattle supply contract holders are currently working on contract prices for August delivery cattle around 710-730c/kg.

While that is a long way from the “frighteningly high” prices around 1000c/kg being paid back in the depths of the cattle shortage in 2022, most stakeholders conceded that prices at that level were “completely unsustainable.”

“That period did the whole industry quite a bit of damage, as consumers simply swapped beef for a cheaper protein source,” one lotfeeder told Beef Central.

The highest point we could find in earlier Beef Central reports was back in February, 2022, when we quoted Woolworths paying contract-holders 1005-1010c/kg carcase weight for typical 70-day steers for May 2022 delivery, and Coles, around 1030c/kg for HGP-free, vendor-bred cattle, depending on location. That was at the height of the cattle price boom that occurred during herd rebuilding after the 2019-20 drought.

It’s important to also point out that retail supermarket prices at the time tracked nowhere near as high as the equivalent livestock purchase prices did, suggesting both retailers were taking a big haircut on retail margins at the time.

In contrast, both retailers copped a lot of criticism, both via informal social media channels as well as more formal retail inquiries, when retail process did not follow livestock prices down as quickly, or as sharply during 2023.

It’s widely understood that major supermarket retailers are reluctant to make frequent, or large changes to retail pricing on any food staples, including beef, preferring to ride-out shorter-term highs and lows for the sake of price consistency.

By October last year, when cattle prices softened dramatically over fears of a very dry summer ahead (based on BOM forecasts), forward contracts for Woolworths and Coles suppliers for December delivery were around 630-650c/kg.

Since then, contracts have risen around 80c/kg, or $240 a head, since then.

One contract holder spoken to for this report anticipates that supermarket contracts will rise further, heading into winter.

“They will never get back to the over-inflated prices we saw during 2022, but typical of most winters, we anticipate that contacts will go up in coming months,” he said.

That would happen on the back of a few factors, he said:

• Domestic weight feeders are likely to get dearer through the winter months, based on supply during June, July, August and September
• On top of that, feedgrain prices have taken off over the past couple of months. White grains ex Downs worth around $350/t only a few months ago, are now making $400-$430/t, and barley $400-$420/t. Most Downs feedlots presently have mixed ration prices of mid to high 400s ($/tonne). More on that in an upcoming grainfed trading budget

“There will certainly be a need for some acknowledgement in forward contract livestock pricing to accommodate those higher production costs,” the supplier said.

Source: https://www.beefcentral.com/news/woolies-coles-drop-winter-retail-prices-on-selected-beef-items-do-cattle-contracts-follow-suit/