2009, Volume 17, Paper 5
ISSN: 1883-5675

The Aggregate Economic Benefits to 2007/08 from the Adoption of Meat Standards Australia

Garry Griffith
Heidi Rodgers
John Thompson
Cameron Dart

Abstract

Meat and Livestock Australia funded a major R&D program in the mid 1990s to investigate the relationships between observable beef characteristics, cooking methods and consumer appreciation of beef palatability. Out of this R&D grew the Meat Standards Australia (MSA) voluntary meat grading system which was aimed primarily at providing an accurate prediction of beef eating quality for the domestic market. The MSA system commenced operations in 1999/2000. A survey of retailers and wholesalers based on prices for MSA graded beef (3 star or better) versus ungraded beef was used to quantify the gross benefits associated with using the MSA system. Over the period 2004/05 to 2007/08, beef consumers across Australia were prepared to pay around $0.32/kg extra for MSA branded beef on a carcass weight equivalent basis to guarantee tenderness. This beef is primarily sold through independent butcher shops. These retailers kept about $0.06/kg and paid their wholesale suppliers the remaining $0.26/kg to source MSA compliant cattle and MSA graded carcasses. About $0.14/kg was passed back to cattle producers on average. However premiums for live cattle that eventually grade MSA are relatively new, and vary considerably by State. In New South Wales where the MSA wholesale margin was typically well under the national average, only about $0.05/kg was passed back, while in Queensland where the wholesale margin was a little higher than the national average, around $0.20/kg was passed back. The cumulative retail-level economic benefit of the MSA system to 2007/08 is estimated to be around $300 million, with a current annual benefit of around $57 million. Given total costs of the R&D and the subsequent development of the MSA system of about $74 million to date, the ex post R&D benefit-cost ratio therefore is in the order of 4:1, to date. Accounting for the additional implementation costs in processing plants in particular results in an industry benefit-cost ratio of at least 2:1, to date. 

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