Trade

China continues to shine in October’s record beef exports

Jon Condon, 03/11/2013

 

Growth in exports to China continued in spectacular fashion as Australia registered another huge number for beef export shipments recorded during October, in the wake of this year’s extreme drought-induced cattle turnoff.     

Trade data released on Friday afternoon by the Department of Agriculture, Forestry and Fisheries showed total beef exports for October at 104,074 tonnes. That was:

  • the highest October figure on record
  • the second highest monthly figure recorded this year, and
  • not far short of the all-time record for any month set back in July.

October shipments were almost 10,000t above the previous month, and 10.6pc above where exports sat this time last year.

Significantly, the big jump in exports last month occurred despite a strong head-wind in currency value. The A$ averaged US95.21c last month – almost US2.5c higher than in September (US92.73c).  

It could have been worse, however. Yesterday, the A$ was trading at US94.5c, whereas this time last year, it was sitting almost 10c higher, at US103.7c.

The contrast between 2012 and 2013 is made even more apparent in calendar year-to-date export comparisons. Year-to-date exports clearly reflect the huge impact that drought across northern and eastern Australia has had on cattle turnoff patterns and processing activity in 2013.

Total export January-October have now reached 903,333t, a 15pc increase over this same period last year, and a record for the first ten months of any year. The increase calendar year-on-year represents an additional 116,000 tonnes of exported beef, equating to 580,000 additional slaughter cattle, based on an average 200kg yield of saleable beef per carcase.

To put it another way, 2013 shipments are now within 60,000 tonnes of the full 12-month shipment period last year, with two full months of trading still to go.

So where have these exceptionally large export shipments driven by cattle turnoff gone? Virtually everywhere it seems.

 

China phenomenon rolls on

It’s hard to over-emphasise just how significant has China been this year in helping effectively dispose of the abundant supply of Australian beef.

One major exporter put it colourfully when he said Australian export prices would have been in “more strife than the early settlers,” if China had not come along when it did late last year.   

China accounted for another 16,710 tonnes of Australian beef in October – yet another all-time monthly record. As expected, the trade out of Australia to China last month was made up entirely of frozen product, following the surprise temporary suspension imposed on chilled beef in late September, based on translation issues in language used in import permits – still to be resolved. Click here to view Beef Central’s earlier article on this topic.

The October export volumes to China easily exceeded the previous record of 16,100 tonnes set in August, when chilled exports accounted for 8pc of the trade. The October figure was up 15pc over the previous month, and 122pc above October last year (7524t), when China was just beginning its spectacular trajectory as a new customer for Australian beef.

The calendar year-to date figures are also extraordinary. From January-October inclusive, China has now taken almost 125,000t of Australian beef, compared with just 17,300t for the same period the previous year.

It is eclipsed in size only by the US (177,300t, year to date) and Japan (241,000t YTD) as Australia’s largest beef customers, having already left South Korea a distant fourth at 113,000t.

At current rates of trade, China could easily exceed 150,000t of Aussie beef for the full year. Not to disparage MLA’s projections in any way, but simply to illustrate what a surprise packet China has become, at the start of this year it was forecast in MLA’s 2013 Annual Industry Projections as likely to take around 35,000t this year.

 

US also taking more product

Aside from China, the US has shown a solid lift in mostly manufacturing beef trade out of Australia, accounting for 21,500t in October, a strong 10pc rise on September trade, and a similar rise over October last year, when the US was still heavily liquidating cows due to drought.

Last month’s rise is due to the decline in cow kill now being experienced across the US, leaving a widening gap for Australian 90CL grinding beef. It’s reflected also in pricing, with Australian frozen 90CL cow trimmings last week making A422c/kg, up 5pc from 402c/kg this time last year.

Calendar year-to-date, however, the US has taken only 177,300t of Australian beef, an 7pc drop from the same period a year ago (190,000t), due mostly to new and alternate customers like China and the Middle East ‘out-gunning’ US imported beef buyers on price.

Currency movements and cross rates have also contributed to that, as has the bans on US beef in markets like Russia and parts of the Middle because of beta agonist use, and China over lingering BSE concerns.   

 

Japan, Korea trade well back on year-ago 

Exports to Japan during October are basically unchanged from September at 21,500t, but considerably worse off than October last year when trade was above 24,500t. Mounting export competitive pressure from the US is a big factor, as a result of this year’s age-related protocol adjustment for US beef in Japan.

Partly, also, because of bans on US beef in alternate export markets like China and Russia over beta agonist use, the US has made big gains in exports to Japan this year, largely at Australia’s expense. In July, US beef exports to Japan were up 46pc from July of 2012, and the largest monthly total seen since the emergence of BSE in the US in 2003. Year-to-date US beef exports to Japan are up 52pc from the same period last year.

US Meat Export Federation chief executive Phil Seng recently said that while expanded access for US beef in Japan and Hong Kong had helped sustain export growth, the US remained locked out of China, the fastest-growing beef market in the world.

Australia’s export to Japan, year-to-date, have reached 241,900t, down about 7pc from the same period last year, as US shortribs and other in-demand single cuts continue to flood into the market.

Korea, now only Australia’s fourth biggest market after China, last month took 13,700t of Australian beef, up 8pc from the previous month, but 7pc below this time last year.

Recent currency movements, and Australia’s growing disadvantage against the US in tariff rates applied to beef entering Korea as a result of the US’s success (and Australia’s failure) in completing an FTA with the country, are beginning to weigh heavily on the trade.

Currently Australia is at a 5.3pc tariff disadvantage over the US in competition in Korea, and that differential will grow by an extra 2.66pc from January 1 next year, and every year hence, until Australia can secure its own FTA deal. See an earlier Beef Central FTA story here.   

That is reflected in year to Australian year-to-date exports to Korea, which reached 113,000t through to October 31.

 

Other markets stronger

For reasons explained above, the Middle East region continues to perform strongly as a customer for Australian beef, taking 4334t during October, about 30pc more than this time last year (3079t).

Year-to-date beef exports to the Middle East have reached 53,385t, about 60pc higher than the same period in 2012.

Total export trade to the EU for October reached 2008t, about 5pc up on September, and 10pc better than this time last year. Year-to-date exports to the EU up to October reached 16,816t, compared with 12,000 t for this period in 2012 – a 40pc rise in Australia’s highest value beef market. Opportunities under the expanded grainfed EU quota have driven this growth.

Elsewhere, there was good growth in emerging markets like Russia and the former Soviet states (4709t, 88pc up from this time last year and 10pc up from September); and Indonesia, which recorded easily its largest monthly shipments this year, taking 5275t of beef.

A strong part of the explanation for this is the recently relaxed ‘quality beef’ segment access intended for restaurants, that can only be air-freighted into the market.

In comparison, September exports to Indo were only 2223t, and October last year, 2594t.

Year to date, Indo has now taken 28,600t of Australian beef, a 27pc increase on the same period last year, but a far cry from the 52,000t exported as recently as 2009, before current Indonesian self-sufficiency measures destroyed the market through restricted import permit access.

The Philippines continues to be a solid performer for Australian beef, taking 2600t last month, and almost 22,000t year to date.

  

 

 

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