- Readers are advised that DAFF was more than a week late in releasing January’s monthly export figures this afternoon, February 10. It blamed IT issues.
The relentless drought-driven surge in beef slaughter has seen January beef exports reach an all-time monthly record, going close to 70,000 tonnes for all markets.
Compare this with January last year, when Australia exported a little over 55,000 tonnes, and on face value it sounds like a ‘substantial' increase of around 15,000t, or 27 percent.
But look at the sequence of January exports over the past five years a little more closely, and the sheer enormity of the current production cycle is laid bare.
Last year’s January export volume of 55,147t was in fact itself a record volume for the month, while the immediate past four years (2010-2013) January exports average has been just over 47,000t.
That means latest January exports completed ten days ago are in fact more than 48pc higher than that four-year average number.
Three main factors have driven the January volumes to stratospheric new highs:
- The obvious: Prolonged dry conditions continuing to push cattle to market. Reference this morning’s weekly Eastern States kill report on Beef Central for more on this.
- The slightly less obvious: Conversely, January is often the slowest month for Australian beef exports, being typically plagued by slaughter stock access problems caused by road closures and paddock access difficulty driven by rain and localised flooding. That has obviously been just a distant memory this year.
- The least obvious: Underlying strength of international demand for Australian beef has been an absolute godsend during the recent period of record turnoff, in finding homes, at good prices, for abundant Australian beef. Favourable currency movement has obviously helped that, with the A$, currently sitting around US89c, about US13c (or 14pc) below where it sat this time last year.
Looking at last month’s export destinations in detail:
US: Trade to the US in January reached 13,832 tonnes, down from 17,700t in December, but almost 2000t higher than time last year, as the US runs into a big red meat supply shortfall, and skyrocketing wholesale prices. Other competitive export destinations are ‘robbing’ the US of its traditional supply of manufacturing beef out of Australia.
Japan: Japan took 15,486t of Australian beef in January slipping about 1500t on this time last year, and well back from December shipments of 22,800t.
The economic environment remains sluggish, while stock levels are reportedly high, which on top of competition from the US, combined to hinder demand, which is likely to remain the case for the coming months.
Again, vigorous competition from other export destinations continued to be the main reason for the year-on-year decline in Japan, and there is growing evidence that Japan no longer has the capacity to exert the buyer influence and dictate terms over the Australian beef market that it has done over the past 15 years. This may yet emerge as one of the most significant turning-points in competition dynamics for Australian beef seen in recent history, in Beef Central’s view.
Korea: The start of another calendar year, and the start of an even yet more onerous tariff disadvantage to Australia in trying to compete in the South Korean imported beef trade. Tariffs on Australian beef imports since January 1 have again slipped further behind, in comparison with those applying to US beef under the US/Korea Free Trade Deal.
The difference now stands at more than 8pc, and will continue, at least until Australia’s own FTA with Korea is fully-ratified by both governments.
In the meantime, our exports for January to Korea reached 10,214 tonnes – way down from 16,200t in December, but considerably better than the 8000t trade this time last year, when Korea was liquidating its own herd.
China: For once, exports to China took a short breather during January, reaching just over 10,000t. That’s the lowest monthly figure in 12 months, comparing with 14,000t for December last year, but still dramatically higher than January last year, (4437t) when the market was still beginning to emerge.
One of the factors in the decline last month, was the passing of Chinese New Year – traditionally a high-demand period for ‘luxury’ proteins like beef. Most beef had to have passed through customs by around January 24 in order to make this year’s festival, which fell on January 31, trade sources said.
China’s ban on chilled exports out of Australia continues, with January’s entire shipments – 7575t boneless; 851t bone-in; and 1563t in carcase form – being entirely frozen.
Russia and the former CIS states: Russia continued to disappoint, taking just 269 tonnes of Australian in January, collapsing from 1289t in December and 811t this time last year.
Last calendar year’s total beef imports by Russia were the lowest since 2004, totalling 579,000t – back 7pc on the previous year. The restrictions placed on US and Mexican beef in early 2013, combined with the significant and continuous increase in chicken and pork consumption in recent years, contributed to the decline in Russian beef imports during the year.
In early 2013, Russia banned beef imports from the US and Mexico over the use of Ractopamine, which saw the total combined export volume to Russia for both countries fall from 51,000t in 2012 to 369t in 2013. The consequent gap in supply, as well as the reduction in Australian and Uruguayan shipments during 2013, assisted Brazil and Paraguay to increase their market share. Russian beef imports from Brazil rose 24pc in 2013, to 308,000t, giving Brazil a 53pc market share.
Meanwhile, Australian imports in 2013 declined 21, respectively. Tthe Australian frozen beef that would usually be destined for Russia was increasingly shipped to countries such as China and Saudi Arabia during 2013.
Indonesia: There were further positive signs in the Indonesian beef market, with exports last month of 4003 tonnes, almost four times the level of trade seen this time last year, and not too far off trade in December, as import permit issues start to subside.
Middle East: The Middle East region continues to be another strong export success story, taking 3626t of Australian beef in January – almost identical to December, and 10pc better than this time last year. Saudi Arabia was easily the strongest component, taking almost 1300t.
EU: Exports reached 1296t in January, up about 50pc on this time last year, but 300t short of December trade.