Export

Near-record May beef exports driven by historically high kills, heavy demand

Jon Condon, 03/06/2015

IT SHOULD come as no great surprise given the recent sequence of record beef kill weeks driven by drought, but May has again posted a monthly beef export volume which is not far from all-time records.

Shipments to all offshore markets for the month reached 117,487 tonnes. Barring the crazy period back in the 1970s Beef Slump era, that figure is surpassed only by March’s all time record (+123,000t), and the July-September period last year.

Exports meat shipping trade

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With 80 percent of Queensland now officially in drought, and northern and western areas of NSW faring little better, rates of cattle kill during April-May have continued to astonish market watchers in those states. In sharp contrast with last year, that process has been further assisted by rising cattle prices, driven by strong international beef demand and a declining A$, now worth around US77c.

Trade to all markets last month was up about 4000 tonnes on April, which itself was an in-month record, and was up 8.7 percent higher than this time last year.

In southern states where drought is not an issue, high rates of kill have been stimulated by the sharp rise in cattle prices alone.

May export shipment data yesterday by the Department of Agriculture shows that Australia has now hit 100,000 tonnes or more in monthly exports for the past 12 consecutive months, tracing all the way back to May 2014.

Calendar year-to-date exports tell a similar story, with the January-May period this year responsible for more almost 528,000t of export beef, against 481,000t for the same period a year earlier. That’s almost 10pc above last year’s equivalent year-to-date level.

After two or three years where emerging markets like China, Russia and Indonesia were taking an increasing share of Australian beef exports, the clear trend this year has been a move back to a larger volume of overall trade with long-established customers including the US, Japan and Korea.

 

Booming US trade continues

Last year, emerging customers like China competed vigorously for available Australian manufacturing meat against the US. Since then, however, the US has stormed back as Australia’s biggest beef customer, driven by skyrocketing prices for lean grinding beef in the US caused by local herd decline and beef production shortage.

The May export result was headlined by a massive 41,890 tonnes worth of trade to the United States, a surprising 8.5pc rise over trade the month before, and well over 10,000t higher than this time last year.

The figure was surpassed only by March’s US export total above 42,000t, highlighting just how important the US trade currently is to Australia.

Calendar year to date, exports to the US have now reached 186,161t – a spectacular 51pc rise from the same January-May period last year.

The sharp rise has caused some trade stakeholders to becoming concerned about the US imported beef quota arrangements for 2015.

Australia’s beef quota level for 2015 is 418,214t.That means to fill the quota in 2015, Australia would have to average about 35,000t per month. So far this calendar year, Australia has averaged 37,000t/month, above the rate needed to trigger quota arrangements. The current US beef quota arrangements require 85pc of the US beef quota (355,482t) to be filled by 1 October 2015 in order for the pre-allocation of the remaining 15pc to occur.

There is still a wide expectation that slaughter rates will decline in the back half of this year, helping Australia dodge a bullet in terms of quota triggers.

 

Japan steady

Australia’s export shipments during May to Japan reached 24,795t, about the same as the previous month, but lower than trade in March when Golden Week demand was in full swing.

The May result brings calendar year-to-date figures to Japan to 117,262t, up 9.3pc year-on-year. Lower tariffs on chilled and frozen beef following the ratification of the Japan-Australia FTA is playing a role, as has reduced competition from the US over the period as a result of the appreciating US$ and general beef shortage in the US.

Exports to South Korea for May reached 14,454t, a 7pc rise over the previous month and 14pc higher than the same time last year.

After a slightly slower start to the year, January-May cumulative trade to Korea has reached more than 62,000t, up 4pc on the same period in 2014.

Trade with China in May reached 14,180t, the biggest monthly volume in at least six months. It represents a 5pc rise on the previous month, and a 61pc rise on this time a year ago, when trade started to slip away.

But calendar year-to-date volume to China, at 50,000t, is still 12pc behind where it was a year ago, when China was still coming off the peak of its expansion period. Noteworthy is the extent of bone-in and carcase beef in the mix, totalling almost 3300t last month, or 23pc of Australia’s entire trade into China.

In other export markets, the effects of Indonesia’s trade restrictions on Australian beef, offal and live cattle imports was in clear evidence again last month. Indonesia last year re-imposed strict quota limits on Australian beef, offal and live cattle exports in an effort to boost self-sufficiency in domestic beef production.

Beef exports for May totalled just 2828t, back 7pc on April’s trade, and representing just 47pc of the trade volume seen in May last year. For the past five months, exports to Indonesia have totalled just 15,000t, down 37pc from 23,700t for this period a year ago.

Shipments to the European Union in May, the start of a new quota year, saw shipments reach close to 1500t, down about one third from April, and back 24pc year-on-year. Year to date total is 8700t, about 800t behind last year.

Exports to the Middle East region reached 4800t in May, back marginally on April but a larger 24pc decline on trade seen this time last year. Year to date shipments have reached 22,400t, down from 26,500 this period last year.

Another market that’s displayed a dramatic decline since last year is Russia and the CIS (former Soviet) states, taking just one tonne of Australian beef in May (perhaps for diplomatic service use, we understand). This follows Russia’s trade embargo introduced last year in retaliation against sanctions imposed over Russia’s military activity in the Ukraine. Russia earlier took more than 40,000 tonnes of Australian beef each year.

 

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