February exports pick-up where 2014 left off, hitting 106,000t

Jon Condon, 04/03/2015

AFTER a relatively slow start to the year in January, February Australian beef exports have picked up where they left off in 2014, eclipsing previous volume records for the month.

Exports last month reached 106,054 tonnes, described by the Australian Meat Industry Council as “probably the highest export beef shipments in the month of February on record.”

Exports meat shipping tradeVolumes rose 57 percent on a relatively quiet, holiday-influenced January period, and were 6pc higher than February last year.

Exports to the United States at 37,822 tonnes reached the highest February shipment figure on record.

“Even in the record shipment year of 2000/2001 that saw over 411,000t of Australian beef shipped to the US, February shipments that year were only around 32,000 tonnes,” AMIC said yesterday, after latest monthly shipment data was released.

The result follows a strong recovery trend in beef trade into the US over the past 12 months. This time a year ago, February exports to the US were at 23,600t, representing a 60pc increase year-on-year.

The big February volume to the US has come despite some significant headwinds in the US market, including the prolonged west coast waterside industrial dispute, which until last week’s resolution had badly impacted inbound and outbound trade, and the impact of record cold temperatures on food service demand in the US beef market.

Beef Central columnist Steve Kay will explore the current dynamics of the US beef market in more detail in an item to be published later this week.

Australia’s strong February export result is all the more noteworthy, given the reduction in the national beef herd after two drought-plagued years, and the fact that drought was starting to exert an influence on cattle turnoff patterns by February last year.

The high rate of slaughter seen in Australia during February this year, driven by a sharp rise in cattle prices and strong international demand, has laid the foundation for the big monthly shipment figure.

For the four weeks to the end of February, weekly beef kills in Eastern Australia averaged 5000 head higher than they did the year before.


Other markets mixed

While beef shipments to the US reached an in-month record, there was also a basket of other markets which contributed to the February export trend.

After two or three years where emerging markets like China, Russia and Indonesia were taking an increasing share of Australian beef exports, what’s emerging early this year is a move back to greater trade with long-established customers including the US, Japan and Korea.

Last year, new and 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 imported lean grinding beef in the US caused by local shortage.

Japan also bought strongly during February, taking 24,311 tonnes for the month – up exactly 100pc on January and up 4.5pc on February last year.

South Korea took 12,186t in February, more or less on par with last year, but 63pc higher than January’s lull. Part of that trend, in both Japan and Korea, may be attributed to the difficulty in outbound export trade from the US west coast ports, due to waterside industrial action. The US is Australia’s major competitor for imported beef in both markets.


China trade slows dramatically

In contrast with the US, Japan and Korea, Australia’s trade to China continues to slow, year-on-year.

Exports in February reached 9874 tonnes, back about 25 percent on this time last year (13,100t) when the market was in the middle of its explosive rise. The past three months have all been considerably behind the equivalent period a year earlier.

Traders into China say the market remains “in a mess”, with a huge stockpile (just how large, nobody knows) of frozen beef inventory in place. Beef importers are experiencing strong push-back from customers, in the face of rapidly rising (in some cases record high) beef prices. Exporters are describing this as ‘price fatigue.’

Chinese consumers are big chicken and pork consumers, of course, and think nothing of switching from one species to another, based on price and availability, and that appears to be happening at present.

As reported earlier on Beef Central, there has also been a major crackdown recently by Chinese authorities on traders involved in the so-called ‘grey channel’ trade. In theory, that should enhance beef export prospects from a front-door supplier like Australia, but what is certain is that, there is no way current approved exporters to the market can fill that gap.

In loose terms, there’s currently about 250,000t of front-door beef exports to China each year, and an estimated 750,000t of illicit grey-channel trade.

China has recently added several new fringe exporters for approved export, but these will make little difference to overall supply.

Hungary has received official approval to export pork to China, under new arrangements signed last year to grant Hungary access. Hungary becomes the 22nd country with import access to China’s meat market and the 15th country with access to the pork market, according to Tianjin officials. China has also removed the BSE-related ban on Irish beef as they increasingly open the ‘front-door’ to meat imports. The United States is still not on that list for beef, but it would take the inclusion of an exporter of the size of the US, Brazil or perhaps India to make any impression in front-door trade.

Chinese authorities recently completed an audit of Australian meat plants, looking at chilled beef production, cold-storage and six export abattoirs. Currently China allows only ten Australian plants to export chilled beef, but hopes remain that more will be added to the approved list, following the inspection visit.

The country’s caution over chilled beef may be more related to China’s limited cold chain infrastructure in many areas to handle less forgiving chilled beef, as opposed to frozen beef exports, sources suggest.


Indonesia, other export markets mixed

In other export markets, the effects of Indonesia’s re-introduced trade restrictions on Australian beef, offal and live cattle imports was in clear evidence again last month.

As reported earlier in Beef Central, Indonesia has re-imposed strong quota limits on beef, offal and live cattle exports to in an effort to boost self-sufficiency in domestic beef production.

Beef exports for February totalled 4300t, only about two-thirds of trade levels seen this time last year.

A similar trend was seen in offal exports, where Indonesia is a key customer for Australia. Beef offals, or ‘fancy meats’ as described in DAFF’s export data, reached just 140 tonnes last month, down from about 1200t this time a year ago.

Beef (muscle meat) exports to Indonesia last year reached their highest level in seven or eight years, topping 53,000t, however that annual figure looks like being greatly reduced under the Indonesian government’s current trade restrictions.

Another market that’s gone absent from export trade in February was Russia (former Soviet states, CIS), following its own trade embargo introduced last year in retaliation over sanctions imposed over Russia’s military activity in the Ukraine. Russia earlier took more than 40,000 tonnes of Australian beef each year, but accounted took only 64 tonnes in February.

Some Russian beef importers are reportedly struggling to get credit and this has put a constraint on imports of any sort, even from Brazil. Analysts say if Russia was to remove its food bans from Australia tomorrow, it would be unlikely that at current world prices, it could resume trade where it left off, except maybe at the very top end of the hotel/restaurant trade.

Among smaller but in some cases high value markets, the European Union took 1774 tonnes of Australian beef last month, about 200t less than this time last year.

The Middle East remained a solid customer for Australia during February, responsible for 3882t for the month, down about 15pc on this time last year.





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