A popular way to retail bulk ground beef in the US is in tubes, called chubbs. Would it work in the Australian market? Chubbs are often used here to package petfood, or cheap processed luncheon meat.

WITH the United States going from Australian beef industry’s biggest competitor to its biggest customer in the past year, it is worth taking a look at whether Australia can gain a long-term foothold in the opportunistic market.

Much has been said about the prospects in the US in recent years, with more than 330m people to feed and a drought-induced herd liquidation plunging its cattle inventory into 70-year lows earlier this year.

“Every year since we have been keeping statistics, the biggest single market has been domestics. This year is the first year a different market has taken over and it is the US,” said Christine Mulhearn from the Federal Department of Agriculture.

While not the best situation for US producers, it has been timely for the Australian industry – with weak economies in other key export markets like Japan, Korea and China.

With significant amounts of red meat already making its way across the Pacific Ocean, there are some key questions to play out in the coming years, like how big is the window for Australian beef and will it result in long-term partnerships?

Dry weather persisting in the US

Herd rebuilding is hardly in full swing in the US, with some of the country’s biggest cattle producing states, including Colorado and Texas, suffering another dry this year.

Dry paddocks in the US state of Wyoming, photographed during Eric Barker’s October visit. Keep an eye out for his separate story on NCBA president Mark Eisele’s King Ranch

On a recent trip to the US, many remarked that the drought was starting to break last year, before the season turned dry again this year.

Kim Holzner, who heads up North American imports for JBS Australia (based in the US), said the US market is getting increasingly concerned about the continued sell-down.

JBS Australia’s head of US imports Kim Holzner

He said while cattle cycles are nothing new for America, the current sell-down and prospective herd rebuild in the coming years is likely to be more pronounced than previous cycles.

“The kill numbers have remained high for longer than the market was expecting,” Mr Holzner said.

“They are starting to decline slowly, but the longer these high levels of slaughter continue to eat into the breeding base, the longer the rebuild is going to take.”

Traditionally, herd rebuilding is known to be faster in the US than it is in Australia, with the overwhelming majority cattle going through feedlots and the US being better resourced for cropping and fodder production.

However, Mr Holzner said he was expecting a significant opportunity for the Australian beef industry over the next three years in a market which covers pretty much all categories of beef.

“The work that has been done over the past 5-15 years by a lot of us working in this marketplace will start to pay dividends for the industry,” he said.

“We are seeing favourable demand for Australian beef across a mix of different items. As the industry has developed in Australia and we produce everything from commodity cow to Wagyu, we are not really confined to any particular part of the American market.

“You have a very large population that is growing and continuing to diversify. The US is not a single market, it is made up of many markets and takes hard work to service it.”

Hard work accessing the US

Many Australian beef brands and processors have made significant investment into building a presence in the US over the past decade. Others have told Beef Central in recent times they have made repeated attempts to build presence in the US to no avail.

The US is the world’s largest beef producing nation and one of the proudest. A lot of its beef is high quality and mostly grain fed. Mr Holzner said it was important to note that the default for US consumers is US beef.

USDA choice graded fillet mignon (eye fillet) on the shelf at Walmart. Going for US$22.82/lb or AU$77/kg.

“Imports are only 10pc of the US beef market, it may go up to 12, 13 or 14pc at times, but we are only ever going to be on the fringe of the market,” he said.

“An established presence in a market like this is key to take advantage of the cycles when they are high and when they are low. We are now seeing renewed interest in the American market, not only from Australia, but from countries like New Zealand and in South America.”

Some Australian beef is being used by chain restaurant Chipotle.

According to Ms Mulhearn, the competition is putting pressure on Australia to meet the strict specifications of the US.

“They sensitive to baiting, they are sensitive to chemicals, they are sensitive to how we produce our meat, they are sensitive to how many boxes we send and what is labelled on them,” she said.

“I personally like my burgers well cooked, but in the US you can get them pretty much raw – which changes what we send, how we send it and how we test it. It is a premium market, but it is a market we have to be cautious to make sure we fill all requirements, because if we don’t then someone else will be willing to fill that gap.”

Significant opportunity for multiple markets

Australian beef is already being used across the US, with McDonald’s being the biggest user and other big chains like Chipotle taking Australian beef. Some brand owners have told Beef Central they are now sending grain fed beef into restaurant chains.

Brand claims, particularly grassfed, are a growing part of the US market and one that many Australian beef brands are hoping to capitalise on.

Ground beef is far from a commodity item in US retail shelves. The examples above include, ground chuck (US$6.99/lb, A$23.50/kg) Heart-brand HGP-free (also US$6.99/lb) and certified grassfed.

Grain fed beef is a like-for-like replacement of American beef in times when production is decreasing. Asked whether he thought grain fed beef could gain a foothold in the US, Mr Holzner said the next three years will be an opportunity to boost its presence.

“Grain fed is becoming a big aspect of what we do, because it is a growing part of the Australian industry,” he said.

“If you look back at previous cycles, we got a foot in the door, established recognition of what Australian beef is all about, built repour with the customers and that does not just go away. We might not be as competitive when American production increases, but the more we chip away and get into different areas of the market the more we have presence that will remain.”

The Trump factor

Another aspect of the US market outlook is the impact of the new Trump administration, which has made clear its intentions to place tariffs on imports.

MLA international markets Andrew Cox and Federal DAF’s Christine Mulhearn.

Meat & Livestock Australia international markets manager Andrew Cox was asked about the potential impact of the new Government during a panel session at the recent Cattle Connect conference.

He said with the Trump administration in its early days, it was hard to predict what might happen.

“That administration has made it quite clear that they intend to impose very high tariffs on any Chinese made goods,” Mr Cox said.

“They also intend to put 10-20pc tariffs on all other imported goods, so there is a threat there. Experts believe that, under the rules of US trade, they will be able to implement such a strategy.”

Mr Cox said it was important to note that there are issues with food prices in the US.

“Australian beef hits the market at a good price point, particular commodity beef for hamburgers,” he said.

“What we know with politics is that if food prices increase, then Governments don’t last very long. The impact of agriculture and food is something to consider with tariffs and whether there is an exemption that be crafted there.

“Our relationship with the US is extremely strong and has withstood various twists and turns over the years. It is particularly strong in the US at the moment with the AUKUS agreement.”

Mr Cox said there were possibly bigger questions about the impact of Trump’s tariffs on other trading partners – like Japan, Korea, the European Union and especially China.

“We do rely on free trade as a nation and when trade wars start, the biggest risk to Australia is economic slowdown as a result,” he said.