February trade reflects listless state of beef exports

Jon Condon, 02/03/2017

THE tough and increasingly competitive global beef trade is reflected in Australia’s February export statistics, released yesterday afternoon.

While the general state of Australian slaughter cattle supply after two years of drought – which has driven the national beef herd to 20 year lows – is the underlying cause for another very low monthly export figure, Australia’s beef export competitiveness is also a factor.

Exports meat shipping tradeFebruary exports to all markets reached just 74,816 tonnes, the lowest February figure in at least eight years (as far back as our monthly records stretch) and 15pc below the average February consignment level seen since 2011. That average includes both the very busy export years of 2014-15, but also the slow years of 2011-12 when bumper seasons held cattle back.

The sharp 6c rise in the value of the A$ against the greenback since December has also reduced the competitiveness of Australian beef on the world stage so far this year.

Reports continue to circulate about chilled and frozen stocks beginning to build in cold storage, and some ‘unusual’ (i.e. export-dedicated) beef brands are beginning to appear in domestic retail outlets – particularly those handling whole primal beef – as some export product is diverted into domestic channels. That reflects the tough trading environment for Australian beef on the world stage, with mounting competitive pressure from the US, which now has an abundance of beef, and Brazil.

February’s exports were almost 16,000t or 18 percent behind this time last year, when export trade was already on the slide.

While most key markets have been impacted, Japan is the outlier.

Trade into Japan, currently Australia’s largest export customer by volume and value, reached 22,818 tonnes in February, a 60pc rise on very low January figures (January is inevitably the low-point in beef export statistics each year due to Christmas holidays processing plant closures), and 5000t or 28 percent higher than this time last year.

US trade back 36pc

The big damage was done in the United States, which accounted for 17,300 tonnes of Australian beef in February, up from about 11,600t in January, but almost 10,000t or 36pc behind February last year.

Recent US herd rebuilding and currency movements against the A$ since the start of the year have further impacted on our US trade, which at its high point 18 months ago went close to 40,000 tonnes a month.

Third largest export market South Korea took 11,283t of chilled and frozen Australian beef in February, a 20pc rise on January trade, but back 4000t or 27pc on the same period last year.

February trade into Korea may have been impacted by stocks of imported beef which built up in bonded cold storage during December, waiting for clearance in January, in order to benefit from the January 1 reduction in imported beef tariff. This is likely to have created a temporary surplus. Australia’s tariff on chilled/frozen beef into Korea declined from 32pc to 29.3pc from January 1 (see earlier report on 2017 tariff changes in customer countries including China, Japan, Korea and the US).  Similar tariff changes into Japan do not occur until April 1.

Fourth largest export market China accounted for 8463t of Australian beef in February, a 58pc rise from January, but virtually identical in year-on-year comparisons. Chilled volumes continue to make up only a very modest portion of trade into China – 517t in February – as severe limitations on chilled access to just ten export plants remain. Negotiations over greater chilled access continue, but there is little sign of a breakthrough at this stage.

Other markets were mostly flat to lower in year-on-year comparisons in February.

Indonesia accounted for just 3085t of beef for the month, about 38pc lower than this time last year, due to mounting competitive pressure from Indian buffalo meat.

Meanwhile the Middle East trade reached just 2077t, 36pc down on February 12 months ago – as competition from cheap Brazilian beef continues to encroach in the region.

Total trade to the European Union region in February reached 1319t, compared with 2034t this time last year.

2017 exports forecast to fall 5pc

As highlighted in MLA’s recent 2017 Beef Industry Projections, Australian beef exports this year are projected to fall 5pc year-on-year, to 970,000t. While this is expected to be the third consecutive year-on-year fall, if it proves accurate, it would in fact still be the fifth highest export volume on record, – behind 2014, 2015, 2016 and 2013.

Rapidly deteriorating seasonal conditions across large parts of Australia’s heartland beef producing country since that report was filed may yet impact on that forecast.





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