Wagyu is all smooth sailing for Aussie exporters

Peter Gilmour had never heard of Wagyu when he was headhunted by Japan to coach its America’s Cup team, but he soon got a taste for it. There are now about 1,000 full-blood Wagyu cattle on his farm beside the Kalgan River in Western Australia and he’s just started exporting under his Irongate brand.

Screen Shot 2018-03-13 at 4.35.17 pmPeter Gilmour with part of his growing herd. Supplied. Image courtesy Financial Review

Mr Gilmour was at various times either a helmsman, skipper or coach of America’s Cup teams for Australia, Japan, the United States and Switzerland from 1987 to 2007. His final act was coaching the Swiss-based Alinghi team to a successful defence of the Auld Mug and then it was “off to wagyu land”.

Wagyu land is a good place to be right now.

The breed has come from nowhere to be the fourth biggest in our cattle industry just behind Hereford. International demand is growing, prices are high and Australia is well out in front as the second biggest producer in the world behind the domestic-focused Japanese industry.

Australian Wagyu Association members, including Mr Gilmour, expect to double the national herd size to 600,000 in the next five years and that growth doesn’t account for new entrants.

Fullblood, purebred and crossbred Wagyu production is forecast to go from about 30,000 tonnes last year to 74,000 tonnes in 2022.

Australian Wagyu Association chief executive Dr Matt McDonagh said about 90 per cent of all the Wagyu produced was exported to high-end markets.

“We believe over the next five to 10 years we’ll certainly go from 2 per cent of the national herd being joined to Wagyu bulls up towards 5 per cent,” he said.

“The exciting thing from a whole-of-industry profitability point of view is the value of the carcases. The value of Wagyu carcases is very high and if we get to 5 per cent of the national herd that might represent 10-12 per cent of the profitability of the national herd.”

Carcase premiums are all about marble score on a scale of 0-9. Stepping up from three to four, for example, can add $1 per kilogram to the price. The average marble score for a full-blood Wagyu is 7.4, twofold more than any other breed.

Dr McDonagh said Australia found itself in the enviable position of having no rivals with critical mass in the export marketplace and only Japan on the horizon as a potential competitor.

Wagyu exported to high-end markets

Australian Wagyu Association chief executive Matt McDonagh said about 90 per cent of all the wagyu produced was exported to high-end markets. Supplied. Image courtesy Financial Review

“Wagyu has been at high premiums and Wagyu markets very strong for a couple of years and, in light of there being no natural competitors in the marketplace for us, we are able to dominate the market,” he said.

“We understand Japan has high production capacity compared to ours. It will be interesting to see if they have long-term ambitions for export globally. They are exporting some product at the moment, but they also import a lot of product from Australia.”

Australia benefits from having established Wagyu brands that are linked to integrated supply chains backed by feedlot operators. Rangers Valley in northern NSW, Stockyard in southern Queensland, Mort and Co and Jack’s Creek are among the big feedlot operators with their own Wagyu brands and reach into diverse markets.

First State Super and the NSW government have also joined the stampede, kicking in $10 million towards Stone Axe Pastoral’s Wagyu project at Ebor. Stone Axe is the brainchild of Mathew Walker, whose family played a key role in introducing the breed to Australia.

Genetics are everything in Wagyu. Much of the Australian industry is geared towards what is known as F1 Wagyu production – putting a Wagyu bull over another breed, usually Angus. Breeding programs to increase Wagyu genetics can produce what are known as purebreds, while full-bloods are direct descendants from revered Japanese herds.

Mr Gilmour has no regrets about starting his fullblood herd a little over decade ago.

“We got 40 head across and the rest is history,” he said. “They seemed very expensive at the time but seem very cheap now. That is up to about a 1,000 head for us and we are still advancing on to a couple of thousand.”

Mr Gilmour has been in Singapore, Shanghai and Taiwan in the past fortnight talking to customers clamouring for a product that is still misunderstood by many Australians.

“We are still a nation of steak eaters as opposed to thin-sliced eaters,” he said.

“When we have got three or four billion customers hankering away to the north, it is hard to spend time on education locally to change that style of eating.

“I think there is still a tremendous opportunity to add to the eating quality of Australian beef production whether it is northern cattle or southern cattle being joined with Wagyu bulls.”

Mr Gilmour said feedlot capacity was emerging as a limiting factor in the extraordinary growth of Wagyu, but otherwise it is smooth sailing.

He has no unfinished business in terms of the America’s Cup, but his three sons are all “mad keen sailors”. Two have their sights on the Tokyo Olympics in 2020 but are in the same class of boat and only one can make it at best.

“I thought the sweetest part out of all of this would be supporting the Australian Olympic team with Australian Wagyu from the Great Southern at the Tokyo Olympics,” he said. “There is some real irony in that.”

Financial Review |  By Brad Thompson