Executive summary
The red meat industry is traditionally recognised for its production of muscle meat for human consumption, such as lamb chops and scotch fillet steak. Nevertheless, a considerable yet frequently overlooked segment of each animal is known as the “Fifth Quarter,” comprising co-products including organs, bones, hides, fats, and blood. These co-products are integral to the sector’s sustainability and profitability, as they can be processed into high-value commodities such as leather for apparel and automotive interiors, fertilisers, and pharmaceutical products. Despite their extensive applications, co-products tend to be undervalued at the farm level, with most economic gains accruing to processors who oversee extraction, refinement, and marketing once ownership transitions from farmers.
This report examines three key issues: the reasons co-products remain undervalued at the farm stage, potential strategies to improve transparency and recognition for farmers, and the implications of current management and value distribution policies across supply chain stakeholders. The analysis highlights that the existing supply chain structure, centralised processing dominance, and contemporary market dynamics collectively result in limited direct financial returns for farmers from co-products. This situation adversely affects farmers’ incomes and business viability and has broader impacts on industry transparency and consumer confidence.
Industry perspectives have been reviewed, and opportunities for collaborative ventures and enhanced business practices are explored. The report recommends the Meat Industry Association establish a template to facilitate collaboration among processing members in the marketing and development of co-products. Additionally, the introduction of a distinct share value for investment by farmers and other stakeholders is proposed, aiming to unlock and fairly distribute the latent value within the Fifth Quarter. Implementing these measures would foster local value addition, with the objective of delivering increased financial returns to both processors and farmers, thereby enhancing industry profitability and competitiveness amidst land use changes. Sustained lack of profitability threatens the industry’s overall stability.
By encouraging innovation and ensuring equitable benefit distribution, particularly to farmers, the industry must enable returns of at least $1kgCW(carcass weight profit for beef and $0.20kgCW for lamb directly to farmers to attract succession and support generational change as ownership transitions occur. The future generation demands profit not solely derived from capital gains on land but from value creation across the entire animal. Accordingly, profit generated through comprehensive utilisation of all animal components is vital for processors and essential for the long-term viability of farming.
Geoff Crawford
