China volumes start to recede, in smaller February beef exports

Jon Condon, 03/03/2020

Australian beef exports to China and other key markets slowed in February, as the first signs of fundamental supply and demand adjustments since the major rain event across eastern states start to be seen.

Chilled and frozen beef exports to all markets reached 92,968 tonnes in February, according to Department of Agriculture statistics released a few minutes ago.

The figure was down 2.3 percent on the same time last year, and is likely to prove to be just the ‘tip of the iceberg’ as the industry changes gear, and moves into a herd rebuilding phase after 18 months of continental-scale drought.

ABARES figures released this morning (see separate report) show the national beef herd at 30 year lows, and females which last year made up 57pc of weekly kills for large parts of the year, rapidly disappearing from kill rosters.

Adult cattle slaughter in 2019 lifted 8pc on 2018 levels, to 8.5 million head – the sixth highest on record. For the last six months of the year, adult cattle slaughter tracked well above the five-year average, as conditions deteriorated and cattle were destocked, supporting processor throughput.

All this suggests beef exports for the remainder of this year are likely to be dramatically lower than 2019, in places well below five-year averages, as females are retained for breeding, and the smaller pool of grower cattle impacts supply availability.

MLA currently has adult cattle slaughter in 2020 likely to drop 15pc, to 7.2 million head.

While China export volumes remained substantial at 16,732 tonnes last month, Beef Central was told by trade sources that this figure was masked, somewhat, by shipments of beef bought earlier Chinese customers, but delayed at customer request due to major meat price movements seen late last year.

Latest effects of coronavirus on Chinese ports and infrastructure apparently came too late to show-up in February export data.

Last month’s China shipments were back about 12 percent on February last year, but the real market surge in China volume did not start to ‘take off’ until around mid-year. In November for example, volume reached a record 34,264t – more than twice the size of last month’s trade.

A more accurate picture of China trade volume will not appear until March figures are released in a month’s time. An exporter source with heavy exposure to the Chinese market yesterday told Beef Central that some signs were emerging that the enormous backlog of containers on Chinese ports was now starting to clear, and he was confident logistics problems, at least, would start to resolve by the middle of March.

Despite that, food service trade activity in China remains desperately flat, as Chinese consumers continue to avoid going out as much as possible, while the retail segment is much less affected.

China’s beef imports are expected to slow during the first half of 2020, analysts say in this report published last week.

February is typically a rebuilding phase for Australian beef exports after Christmas processing closures, and last month was no exception.

The slowdown in volume to China is not necessarily being reflected in greater uptake into some other customer countries, it seems.

Trade to Japan last month reached 23,714t, up from 18,000t the month before (January is always the smallest shipping month of the year), but virtually the same as trade seen this time last year.

Volume to the US may have displaced some of the lost China tonnage last month, as competition between the two for similar manufacturing beef subsided.

Volume to US east and west coast ports last month totalled 19,485t, up about 24pc from January, but much the same as February trade last year.

South Korea took almost 13,000t of Australian beef last month, up from 10,000 in January, but a little behind February last year when 13,600t was consigned.

Smaller markets were also active last month, with the Indonesian trade benefiting further from the recent Free Trade Agreement, taking 5645t in February, up by 16pc on this time last year.

The Middle East region accounted for 2608 tonnes of Australian beef last month, a 20pc rise on January and 12pc higher than this time a year ago.

The EU grass and grainfed chilled trade took 1408t last month, up about 30pc from January but much the same as February last year.

Looking ahead

The global protein market experienced an exceptional year in 2019, with the impact of African Swine Fever in China creating a massive protein deficit, and a reshaping of the global meat trade as more product was directed to the China market. Australian beef exports were very much part of that shift, with exports to China growing 85pc and the market emerging as Australia’s largest market by volume.

The protein deficit in China is set to be just as apparent in 2020, but many shifts in the global landscape will impact how this unfolds, including the US-China trade relationship, production and policies from South American suppliers and policy shifts within China itself.

The impact of Coronavirus, both inside and outside China, will only add to this complex equation. Demand for beef from many other key markets around the world remains robust, but buyers must now compete more fiercely for that product.





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