Live Export

Talks to finalise US live export protocol progressing

Beef Central, 10/11/2015

While the recently opened cattle export trade to China captures most live export industry headlines, negotiations to open a new feeder cattle trade to the United States are progressing quietly behind the scenes.

In April, Beef Central columnist Dr Ross Ainsworth reported on industry and Government moves to develop a new health protocol with the US to allow the export of feeder cattle from Australia to the country.

It has been well documented that the US herd has fallen to a 60 year low in recent years following a severe and widespread drought, creating a shortage which has left US feedyards and processors with under-utilised capacity.

The shortfall has also driven US feeder cattle prices to significant highs, creating an attractive price differential to Australian feeder steers which has sparked interest from Australian exporters in shipping cattle across the Pacific.

Easing US prices in recent months have eaten away at some of that gap, but export sources say a reasonable differential still exists at current price levels.

A lower Australian dollar also favours the equation.

US feedyards already receive a reliable source of supply from import customers, with more than one million feeder cattle imported into the US from Mexico and Canada each year, including around 1.5 million last year.

Dr Ainsworth’s view is that the trade provides very strong mutual benefits for both countries, which should help a workable agreement to be achieved.

Livestock export industry sources have told Beef Central in recent weeks that negotiations have reached advanced stages and there is growing optimism that a final protocol announcement may now be close.

The key question is whether the terms of the final protocol and the costs it imposes will allow a commercially viable trade to develop between the two countries.

One Australian exporter commented that with two million cattle being placed on feed in US feedyards every month, and each being fed for 180 days, Australian supply would struggle to satisfy demand at current levels.

The US is one of 12 “priority markets” which are currently the focus of a protocol committee, which comprises livestock exporters, producers and Federal Government representatives.

US cattle editor sceptical about trade’s potential

US based Cattle Buyers Weekly editor and regular Beef Central commentator Steve Kay is well known for telling it like it is and sees little reason to believe a new health protocol will lead to a significant trade in cattle from Australia to the US.

In his view there are four reasons why a trade is unlikely to develop:

“First, I assume the exports would involve the highest quality cattle that currently go on feed in Australia. Given that Australia’s national cattle herd is forecast to drop to 26.150 million head in 2016 from 27.600 million this year, I can’t imagine how feedlot operators in Australia will allow many cattle to leave the country. But they will have to bid them away from exporters to do that.

“The second key point is that U.S. feedlots would want only cattle with English genetics (ie. Bos Taurus). They will not want Bos Indicus cattle with any hint of a hump. So the cattle would be very different to those going, say, to Indonesia.

“A third point is that the U.S. cattle herd is expanding significantly, from 88.526 million head in 2014 to 89.800 million head this year to an estimated 92.900 million head on next year. All the expansion is coming on the beef side of the herd. USDA ‘s semi-annual inventory report showed that the number of beef cows in the U.S. on July 1 was up 750,000 head on a year earlier.  So feeder cattle prices are well off their record highs of a year ago and will continue to decline year-on-year.

“A fourth point is that there will be considerable opposition by some producer groups to allowing Australian cattle to enter the U.S. These groups have fought for years, albeit unsuccessfully, to keep Canadian and Mexican cattle out of the U.S.  NCBA might profess to be neutral on the issue but it will likely raise concerns about disease guarantees, etc. More than 20 years ago, Cactus Feeders (then the largest feeding operation) raised the possibility of importing Australia feeder cattle and the outcry forced it to abandon its plans before they got off the ground. There might also be big opposition from animal rights groups about transporting young cattle such a distance.”

More news on the outcome of Australia-US Government negotiations to develop a health protocol is expected in coming weeks.

HAVE YOUR SAY

Your email address will not be published.

Your comment will not appear until it has been moderated.
Contributions that contravene our Comments Policy will not be published.

Comments

Get Beef Central's news headlines emailed to you -
FREE!