Trade

Beef industry cracks million-tonne export milestone, under drought’s shadow

Jon Condon, 02/07/2013

 

AUSTRALIAN beef exports for the fiscal year ended June 30 hit the magic one million tonne mark for the first time, although the milestone was widely anticipated given the extreme high rates of kill experienced since February due to adverse weather conditions.

Monthly export data released by DAFF yesterday showed total exports for the 12 months ended Sunday at a record 1,013,875 tonnes, a seven percent rise on the previous 2011-12 fiscal year.

In simple tonnage terms, that represented a 66,000 tonne rise in exports over the previous 12 months – not that far off an entire month’s trade, under normal conditions.

The biggest contributing factor was the huge surge in kills experienced across eastern states since very dry to drought conditions started to take hold.

While shipments for the month of June were perhaps not as high as some might have expected, reaching 87,800 tonnes, June is not traditionally a busy month for exports. By comparison June last year reached only 81,600 tonnes, meaning trade was still 7.6pc higher than year-earlier figures.

Some exporters pointed to the subdued demand from importers of Australian beef during June as also putting a handbrake on bigger numbers. As reported earlier on Beef Central, there has been a tendency among importers watching the recent US13c slide in the value of the A$ to limit imports to ‘just-in-time’ buying, being wary that consignments bought today might start to look expensive in a week or two’s time.

The recent stabilisation of the A$ around US92-93c may see an end to that practice, however, with a return to more normal buying patterns likely, export contacts say.

The somewhat modest total June export figure contrasts sharply with exports in May, which hit an all-time monthly record, exceeding 100,000 tonnes for the first time in history. The May total of 103,207t was up 19pc on export activity in May last year, and followed a series of earlier record monthly shipments.

Drought-driven herd liquidation across Queensland, NSW and Victoria, coupled with the inflow of cattle out of northern Australia that would normally pass through live export rather than slaughter channels, and the fact that the beef herd has expanded significantly over the previous three years of much better than average seasons has sparked the big kills.

This year has seen no less than ten Eastern weekly kills above 150,000 head, all surpassing the previous weekly kill record.

 

Swing from traditional to emerging markets continues

Given the financial year milestone, we’ll split this month’s exploration of export performance into two parts: full financial year results, followed by results for the month of June.

The full-year shipment figures clearly underline a trend that has been emerging for some time: a big swing into emerging markets like China the Middle East and south Asia, offsetting a softer trend into some of our established markets like the US and Japan.

Worth noting, also, is the proportion of frozen beef sold last financial year, reflecting a shift in the type of cattle presented for slaughter towards cows and away from prime steer. The frozen figure for 2012-13 was 73.6pc of total exports, up 1pc on a year earlier.

Japan for 2012-13 took 298,800t of Australian beef, falling below the 300,000t figure for the first time in a decade (the last time was 2002, in the depths of the country’s BSE crisis when beef consumption virtually ceased), as US beef enjoying more liberal trade access continues to encroach on Australia’s share. For the previous financial year, Australia shipped 325,800t, representing an 8.3pc decline in trade.

Volumes into the US for the financial year just completed reached 206,600t, about a thousand tonnes better than a year earlier, but still very low, by historic standards. The US consistently took more than 300,000 tonnes of Australian beef each year up to 2007, but the figure has never regained the lost ground since.

The high levels of US beef kill due to their own drought for the past three years has been one factor in declining trade, as well as other markets ‘out-gunning’ the US on  price for Australian lean manufacturing beef.

Our third largest export market, South Korea, was responsible for 137,700t of Australian beef for the year just ended, a 12pc rise over the previous fiscal year. As competition between Japan and Korea has increased for US product during the year, Korea has tended to source more of its favourite cuts like chuck roll and brisket from Australia.

As has been widely chronicled by Beef Central over the past year, the big surprise packet in Australia’s export trade over the past 12 months has been China.

The fiscal year story captures the explosive growth seen in Australia’s new fourth largest market better than any, because the fuse behind the real surge in trade was not really lit until last July.

Sit back, and soak up these extraordinary figures…

For the fiscal year ended Sunday, China took 92,300 tonnes of Australian beef, compared with just 7700t for the previous 12 month period. That’s a breathtaking 1098pc increase in volume – a rate of growth unprecedented in Australia’s export history in any ‘major’ beef export market.

The performance largely explains where the beef displaced out of big traditional markets like the US and Japan has gone.

Fairly predictably, frozen beef still dominates trade into China, accounting for 88.8pc of the total. But even the chilled shipments are nothing to be sneezed at, topping 10,400t for the year, as trade into the better end of food service and retail grows.

Any earlier predictions that the growth in direct trade into China might be transient, and that the traditional illicit ‘grey channel’ exports via neighbours like Vietnam and Hong Kong would ultimately regain control now appear unfounded.       

A year ago it might have been almost unfathomable, but there is a real prospect that China might go past South Korea as Australia’s third largest beef export market some time over the next 12 months.

In other important markets, total trade into the lucrative EU market for 2012-13 reached a record 17,400t, up from 13,400t a year earlier. That’s up 30pc, and is being driven squarely by new opportunities in the big growth market for high quality grainfed beef, under the EU’s 48,000t import quota.

Beef Central obtained some reliable figures yesterday showing that we went hellishingly close to filling our EU Hilton quota (grassfed, country-specific) for 2012-13, consigning more than 6800t out of the available 7180t allocation.

In contrast our grainfed shipments totalled about 8000t, around half of the US’s export volume to the EU of 16,000t – but clearly demonstrating the huge, huge market opportunity that still exists in Europe, if Australian supply chains can get their act together better.

The Middle East region also offers plenty to celebrate for Australian exports over the past year.

Total shipments for FY 2012-13 reached 47,800t, a 52pc rise from 31,500t last year. One of the undeniable factors is the absence of competing US and Brazilian product due to Middle Eastern concerns over the use of the beta agonist production tools in those beef industries.

Despite a similar ban in Russia and the former Soviet states, exports to the CIS region were disappointing, reaching 24,400t, down 47pc on a year earlier.           

Indonesia, a 70,000t export market for Australia back in 2008, continues to be plagued by trade access restrictions linked to the country’s self-sufficiency drive, with total exports for the year just ended of 28,600t, down from 37,800t a year earlier.

Currency movements was one reason for a substantial drop in exports to Central and South American destinations, which fell by almost half from 21,500t in 2011-12 to 13,200t last year.

Taiwan was almost unchanged from a year earlier, responsible for 37,600t of Australian beef for the year; the Philippines was significantly improved (29,700t, +53pc); as was Malaysia (+15pc at 16,600t), and Singapore (+16pc at13,100t).

These results are part of the broader ‘Total Asia’ story for Australian exports, which show the region accounted for 666,000t of Australian beef for the year just ended – almost exactly two thirds of all exports.

Last year, that figure was 593,000t, or 62pc, and proportion continues to grow.    

 

June monthly performance 

For those interested in the monthly data, here are the export figures for major markets in June, with the corresponding June 2012 beside them in brackets:

  • Japan :  25,341 (30,374)
  • US :  16,102 (19,680)
  • Korea : 11,062 (12,423)
  • China : 10,657 (796) Editor's Note: typo in this figure in earlier version of this report.
  • Total EU : 2048 (1975)
  • Russia & CIS : 2362 (2665)
  • Indonesia : 2815 (3615)
  • Total Middle East : 5246 (6186)

Despite a kinder exchange rate during June, export trade into the US continued to struggle, back 18pc on the same month last year.

The big decline in exports to Japan for the month (-17pc) is likely impacted by Japanese concerns over the risk of triggering the country’s Safeguard protection mechanism, which will be discussed in a later story on Beef Central.

Triggering of Japan’s safeguard protection mechanism close to the end of the quarter would have seen beef tariffs on all imported beef rise from the current 38.5pc to 50pc, for the remainder of the Japanese financial year through to next March.

Currency problems associated with the 20pc devaluation of the Japanese Yen this year have also affected Australian beef’s competitiveness in the Japanese market.

 

 

 

 

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