ALMOST a month after Trump imposed so-called ‘reciprocal’ tariffs on goods sold into the United States, clearer export beef trade trends are now starting to emerge.

Despite the fact that Australia runs a large trade deficit with the US, Aussie beef was hit with a 10pc import duty along with a host of other ‘bottom tier’ countries.

The tariff war that’s arisen between the US and China has now made US beef exports to China prohibitive, facing tariffs of 145pc. China has already cancelled large US pork shipments totalling 12,000t, US trade media reported this week.

The result hasa been a sudden spike in demand for Aussie beef out of China, although as described further below, this, in itself, carries another considerable risk.

Australia’s April beef export data will be available early next week, but it may not yet capture the big shifts in export trade that are looming. May numbers are likely to  present a clearer picture.

US imported beef prices up, but trade volume subdued

Demand for Australian beef out of the US, especially frozen trimmings used for hamburgers and tacos, remains ‘quite modest,’ trade sources have told Beef Centeral this week, as the market  continues to wait for clearer direction.

“Soon after the tariffs were imposed back on 4 April, it was a real Mexican standoff between Australian exporters and US importers,” one large exporter contact said. “That’s now eased a little, but trade is still very quiet. While prices have risen, volume has not lifted – we’re certainly not getting inundated with bids and inquiry out of the US,” he said.

Prices rise 10pc to reflect to tariff

The Urner Barry Yellow sheet US daily price reporting guide this week basically shows imported prices that are “around the previous (pre-tariff) prices, plus ten percent,” one trader said on Tuesday. Urner Barry prices are typically quoted 4-6 weeks forward, typical of the export trade.

Yellow Sheet earlier this week was reporting US432c/lb for Australian 90s, FOB. Deduct US10c/lb to clear the container, palletise the product and put it on a truck, and then deduct 10pc for the US ‘reciprocal tariff’, takes the figure to US382c/lb, which was “pretty much the price before the tariff was introduced,” the trader said.

“Essentially, this means the Yellow Sheet price reported this week is the old (pre-tariff) price, plus ten percent – meaning end-users in the US market are picking up the entire cost of the tariff,” he said. “It’s all being passed through.”

The current ‘product in limbo’ position means that some Australian beef on the water to the US (carrying a bill of lading prior to 10 May) can still arrive in a US port by a May 24 deadline, without paying the tariff. Once that product clears, however, all Australian beef will effectively be 10pc more expensive.

US beef kills continue to slump

At the same time as that cost burden arrives for US importers, US domestic beef kills continue to slump, as the national herd hits 70-year lows. Last week’s US kill was just 555,000 head – down 60,000 head or 10pc on this time last year. Secondary to that, Trump’s illegal immigrant crackdown is putting additional labour stress on some US packers and feedlots, making operations increasingly difficult, Beef Central was told.

Trump’s tariff chaos has clearly impacted US consumer and business market confidence, in some assessments now back to confidence levels seen in the depths of the COVID era, and Global Financial Crisis.

That’s now being reflected in reduced food service activity and consumer spending on eating out, and trading down out of more expensive beef cuts into grinding beef, or worse still, exiting beef for cheaper chicken or pork.

“All this means that the US beef demand patterns that existed before the tariffs came in is not the same as it is today,” one Australian exporter said on Tuesday. “It makes it harder to measure apples with apples, but we’d expect to see US inquiry grow in the next couple of weeks – tariff or no tariff – as stocks run low.”

The USDA’s next update on domestic red meat and poultry supply, demand and production numbers is due out on 12 May, and should make interesting reading.

China demand surges

In contrast with the US market conditions, demand for Australian beef in China has grown substantially over the past fortnight, as the impact of the US/China tariff war takes hold.

“We’ve seen lots of diversion of product away from the US to customers in China,” one of Australia’s largest exporters told Beef Central. “To a degree, its happened also into Japan and Korea, but mainly China,” he said.

The limiting factor for greater Australian exports to China is HGP-free, meaning direct displacement will be hard to achieve.

Product type will also be a factor. US exports to China have historically been USDA Choice and Prime, marbling score 3-5 type product. Australia’s primary grainfed beef produced in volume (100-day grainfed) does not have like-for-like substitutability with product like this. Nor is our higher quality grainfed produced in the same volume, exporters pointed out.

“Yes, some Chinese customers could move to our Wagyu or longfed Angus categories, but a) it is a lot more expensive, and b) it is not produced in anything like the volume of generic 100-day,” a trader said.

“There is no simple way for China to substitute Australian for US grainfed, despite some of the recent mainstream media coverage suggesting otherwise.”

“Having said that, Chinese customers seeking better quality imported beef have in the past couple of weeks been looking to buy any Australian product that can mimick what they were buying previously from the US.”

More Brazilian beef heading to China, also

At the same time, a lot more Brazilian beef (mostly frozen manufacturing product) that was previously heading into the US is now also being diverted into the Chinese market, for the same tariff reasons. Brazil now faces a total tariff of 36.5pc into the US, versus 12pc into China.

What’s now looming as a key concern for Australia’s growing volumes heading to China is the risk of early triggering of China’s Safeguard market protection mechanism this year.

Readers might remember that the trigger level last year (202,000t) was reached in mid September, lifting the tariff on Australian beef to 12pc for the remainder of the calendar year.

This year, with volume rising rapidly, the Safeguard could trigger much sooner. In simple terms, triggering the tariff would mean an Australian beef item costing A$15/kg landed today, would have to make $16.80/kg after the 12pc tariff is added.

“If we get to the middle of May – just a few weeks away – and Australia is selling June and July shipment beef to China (arriving July and August), the trigger level could happen a lot sooner than we think,” one exporter said.

Brazil does not supply China under an FTA, meaning it is not exposed to a Safeguard mechanism, but pays 12pc tariff all year round.

In the absence of US beef exports into China last month, more US product is now being diverted into Japan, South Korea and other markets. Like Australia, neither Japan nor Korea have applied retaliatory tariffs on US products, including beef.

US beef stocks lower

Len Steiner’s US Daily Livestock Report published earlier this week has US beef cold storage inventories  significantly below historical levels for this time of year. Total beef in storage at the end of March was 194,000t, almost 12pc below the five-year average. Boneless beef stocks were 13.1pc lower than the five-year average.

In a report late last week, US Meat Export Federation said China’s retaliatory duties in response to US ‘reciprocal’ tariffs meant China’s effective duty rate on US beef and beef variety meat was now 147pc.

US MEF’s Erin Borror

“These high duties have effectively halted trade,” USMEF vice president of economic analysis Erin Borror said.

Ms Borror noted that “while USMEF is always working to expand and diversify export markets, China has unique product needs that other destinations cannot fully replace.”

She estimated that China being absent from the market put more than $150 per fed steer or heifer at risk for the US industry.

China’s failure to renew license registrations for 400 US beef processing facilities presents an additional barrier for US exports, as the majority of US beef production is currently ineligible for China, regardless of the applicable tariff rate.

JBS view on tariff impact

JBS senior management recently discussed the impact of US tariffs on global meat trade during an investor briefing.

Head of the company’s North American beef division, Wesley Batista, said it was still difficult to predict exactly what was going to happen with tariffs, because there were many variables involved at the same time.

“There’s counter tariffs, there is what’s going to happen with exchange rates – there’s many things,” he said. “So predicting what happens is still very difficult.”

Speaking from the company’s US beef division perspective, Mr Batista said, globally, he thought JBS was the best positioned in the industry to be able to take any benefits, if there are any, and mitigate risks, if there are any.

“We have operations in Australia, Brazil, Canada and Mexico, in that we can have some benefits as well depending on what happens,” he said.

“And also, when it comes to the JBS US beef business, obviously the export is relevant, but it’s not the primary business we have – our main business is the domestic US market and we’re confident about the US domestic market.”

“But we’re going to need a few weeks with whatever tariffs come our way to see exactly what the impact is. But again, having operations across many different countries really creates a unique situation where we can mitigate those risks.”

Analysts also asked about the beef dynamics outside of the US, in the new tariff era.

“The Australia division margins in the fourth quarter (ended 31 March) were a little softer than we had anticipated,” one analyst said, pointing out that JBS’s outlook commentary sounded like it expected margin expansion in Australia in 2025.

Global chief executive Gilberto Tomazoni said in Australia, the herd size and the availability of the cattle was ‘there’.

In reality, there was climate impact in Australia last quarter, he said, with significant rainfall and flooding in Queensland driving cattle prices up more than expected.

“In contrast, there’s drought in Australia’s south. We also buy cattle in Queensland (for southern slaughter), adding more demand for cattle and pressure on price. This was the reason,” Mr Tomazoni said.

“The cattle is there. Now we are extending the positive cycle for cattle in Australia. And the demand for beef and lamb is very strong in Australia and outside of Australia to export. We are very positive with this cycle of beef in Australia.”:

In JBS’s Brazilian beef operations, the availability of cattle and demand from the market was in balance.

Brazil increased harvest by about 18pc last year, he said. “Eighteen percent is a lot. And it was good because the sector processors were able to increase capacity and absorb the additional offering from the market.”

“And then the price was down, and up, and now I think we reached a balance between the price of cattle and the market, in the situation in the market, because the demand in the market is very strong, especially from China.

“Brazilian consumers are demanding a lot (of beef), we increased the volume in Brazil, we increased the volume in export. And we see that the margin for the next year will be more in line with our fourth quarter expectations.”