August beef exports down 27pc year-on-year, in line with slump in slaughter

Jon Condon, 04/09/2020

AUSTRALIA’S international beef trade dropped sharply in August, in line with the recent trend in reduced cattle slaughter across the nation.

Exports to all offshore markets totalled just 78,021 tonnes last month – the lowest mid-year monthly export volume seen in at least ten years. The previous low-point we could find in our records for August exports was 2016, when herd rebuilding was in full swing. Volume that month fell to 80,600t.

This year’s August exports were down a massive 27pc on the same period last year, amounting to a deficit of more than 28,000 tonnes. Last month’s figure was a further 12 percent lower in volume than exports the previous month – and July, itself, was already dramatically lower, year-on-year.

For the calendar year-to-date, Australia has now exported 720,486t of chilled and frozen beef – a 70,000t or 9pc deficit on the same eight month period last year. That gap will inevitably widen further over the next four months, as it is now clearly evident that access to slaughter cattle will remain very tight until at least next year, or even the year after.

There’s been a gradual decline in rates of slaughter across eastern Australia since April, when weekly eastern states kills were averaging around 140,000 head, to a point where kills are now struggling to reach 100,000 head weekly – a 40pc decline. That’s due primarily to the impact of national herd reduction after severe drought during the 2018-19 years.

That ended in March, with widespread rain across eastern states, and a gradually tightening in slaughter cattle supply has been the underlying feature of the industry since then. More recently a sequence of abattoir closures, due either to COVID control measures or the general lack of cattle supply, has also contributed to the reduction in throughput. Currency is also a factor, with the A$ recently trading close to US74c – up about US7c since the end of April. A higher currency value makes it more difficult for Australian exports to compete in international markets.

Reduction in frozen shipments

One of the tell-tails of the changing composition of smaller Australian kills this year is the proportion of frozen over chilled exports. A much greater proportion of Australian beef harvested from cows is frozen-down before slaughter, than other livestock categories.

Frozen beef accounted for just over 71pc in August exports, compared with more than 74pc for the same period last year. Three percent might not sound all that significant, but under ‘normal’ trading conditions, the proportions of chilled/frozen beef produced in Australia vary little in annualised monthly comparisons.

All major markets were impacted in last month’s massive 27pc year-on-year decline in export volume.

Japan resurfaced as Australia’s largest beef export customer for the month, tipping-out the United States. Japan took 19,661 tonnes of Australian beef in August, down 6pc on the previous month, and more than 19pc down on August last year.

Greater competition is being seen in Japan from US exporters this year, partly due to rising US production, as well as the US-Japan Trade Agreement’s implementation in January, which has seen import tariffs on US beef decrease from 38.5pc to 26.6pc – the same as Australia’s.

The Department of Agriculture has uploaded incorrect data in its August monthly exports report for calendar year-to-date statistics, making accumulated comparisons for each customer country impossible. We’ll add these to this report later if DA corrects the problem.

Big drop in US trade volume

Exports to the United States last month fell sharply, partly due to currency and lack of price competitiveness of Australian lean grinding beef. Total volume last month was 18,213t – down a dramatic 5500t or 23.4pc on trade the previous month, and 12pc lower than this time last year, when Australia was still liquidating breeding cows suitable for grinding beef at a furious rate.

China heavily impacted

After featuring consistently as Australia’s largest volume beef customer for some months, China has continued to decline in significance in export volumes seen in August.

China accounted for just 11,722t of Australian beef last month – a dramatic 14,300t, or 55pc down on this time last year, when China was Australia’s largest beef customer. The decline had already started the previous month, when July shipments reached just 12,500t, down 26pc on June volume.

For the calendar year to date, China has taken about 146,000t of Australian beef – almost 85pc of which was frozen. That figure is down 16pc on the same period last year.

China has now slipped from being Australia’s single largest beef market by volume, to number four in August – behind the Japan, the US and Korea.

A number of factors appear to be in play.

  • China lifted its tariff on Australian beef exports as part of its safeguard tariff protection mechanism in early July, pushing tariffs from 4.8pc to 12pc for the remainder of this year. That has made Australian beef less competitive in the market
  • China has imposed regulations on COVID-testing on imported meat products, despite no scientific evidence that foodstuffs that have arrived by ship can harbour the disease. Some Australian exporters have sought markets elsewhere, as a result of onerous COVID food safety regulations.
  • South America continues to mount a strong competitive challenge in the China market, especially at the price-sensitive commodity end of the market. South American trim, for example, is said to be at least 10pc cheaper than Australian equivalent at present. World-leading cattle prices in Australia recently haven’t helped.
  • A total of five Australian beef plants have been suspended from supply to China this year. The most recent was John Dee at Warwick, over a residue detection claim.

This time last year, the China market was on fire, as the full impact of African Swine Fever on the country’s pig population was being seen. Volume in August last year reached more than 26,000 tonnes, more than twice last month’s total.

South Korea remained a significant beef market for Australia in August, despite mounting competitive pressure from the US. Korea took almost 13,000t last month, slightly higher than July, and 4.5pc higher than August last year.

In other markets, results last month were mixed, but generally reflected the impact of lower beef production in Australia.

Indonesia took 3483t of Australian beef in August, a 21pc reduction from July, and down 39pc on August last year.

The Middle East region continues to struggle under competitive pressure from cheap South American beef, taking 2523t in August, down 10pc on July and 11pc lower than this time last year.

The EU continues to operate at a very low level by historical standards, taking just 648t of Australian grass and grainfed beef last month, down another 22pc on the previous month and 64pc lower, year-on-year. For the year to date, trade is less than 6300t.











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