Trade

September beef exports down 31pc year-on-year, in line with slaughter slump

Jon Condon, October 2, 2020

THE dramatic decline being seen in rates of slaughter as the 2020 year draws to a close was reflected in beef exports for September, which were down 31 percent compared with the same period last year.

Department of Agriculture figures released yesterday show exports to all markets last month reached just 72,619 tonnes – the lowest monthly volume seen in at least a decade, except for the December-January period when many processing plants close for holidays.

Twelve months ago, as beef herd liquidation was still in full swing, September exports topped 105,000t, representing a decline of around 33,000t, year-on-year.

For the calendar year-to-date, Australia has now exported 793,000t of chilled and frozen beef – a 102,000t or 11pc deficit on the same nine-month period last year. That gap will inevitably widen further over the next three months, as it is now clearly evident that access to slaughter cattle will remain very tight until at least next year. Widespread spring rain, as forecast by BOM, would only tighten cattle supply further, especially in Queensland, where conditions are drying off.

There’s been a gradual decline in rates of slaughter across eastern Australia since April, when weekly eastern states kills were averaging around 140,000 head, to a point where kills are now struggling to reach 100,000 head weekly – a 40pc decline. That’s due primarily to the impact of national herd reduction after severe drought during the 2018-19 years.

That ended in March, with widespread rain across eastern states, and a gradually tightening in slaughter cattle supply has been the underlying feature of the industry since then. More recently a sequence of abattoir closures, due either to COVID control measures or the general lack of cattle supply, has also contributed to the reduction in throughput.

China impact

Most key offshore markets were impacted by lower export volumes last month, but the fall in trade to China last month was easily the most acute.

Chilled and frozen exports to China in September reached just 10,387t, down another 11pc on the previous month (already badly impacted by reduced rates of kill) and more than 18,000t or 64pc down on consignments made in September last year.

Trade sources say a number of factors are in play in China, beyond the simple decline in availability of Australian beef:

After earlier surging exports triggered China’s Safeguard market protection provision in June, tariffs on Australian beef exports to China have risen to 12pc for the remainder of 2020, from 4.8pc earlier in the year. Higher tariffs make Australian beef less competitive against other exporters

Five large Australian China-approved export beef plants have been suspended from trade over regulatory/documentation issues, and more recently, claims over chemical residue.

Extreme competition from cheaper South American beef. Argentina, for example, expects to export an incredible 870,000t of beef to China this calendar year, representing 75pc of all its 2020 exports. Reuters reports that China remains the main destination for Argentina’s red meat and that exports are continuing despite the economic shocks of the ongoing COVID-19 pandemic, and despite the temporary suspension of seven Argentine meat plants last month after coronavirus cases were detected among workers.

For the calendar year to date, Australian exports to China have reached just over 155,000t, down from more than 200,000t for the same nine months last year.

Trade into Japan last month was relatively stable, with total exports of exactly 20,500t, a rise of 4.2pc on August trade, but 16pc behind trade in September last year.

Greater competition is being seen in Japan from US exporters this year, partly due to rising US production, as well as the US-Japan Trade Agreement’s implementation in January, which has seen import tariffs on US beef decrease from 38.5pc to 26.6pc – the same as Australia’s.

For the calendar year to date, Australia’s exports to Japan have reached just short of 199,000t, down about 8pc on the previous year.

Big drop in US trade volume

Exports to the United States last month fell sharply, partly due to currency movement and lack of price competitiveness of Australian lean grinding beef, and growing exports out of South America. Total volume from Australia last month was 15,877t, down 13pc on the previous month and 21pc below this time last year, when Australia was still liquidating breeding cows suitable for grinding beef at a furious rate.

Year-to-date, exports to the US have reached 172,000t, down about 8pc on the first nine months’ of trade last year.

Worth noting is that the United Kingdom last month resumed beef exports to the US, for the first time since 1966. While never likely to be large in volume, the UK’s access to the US market is symbolic of the now virtually-complete breakdown in global beef trade restrictions based in BSE grounds. European beef has been banned in the US since the bovine spongiform encephalopathy (BSE) outbreak in the United Kingdom more than 20 years ago. The ban was officially lifted in March.

Exports to South Korea last month were sharply down, due mostly to mounting competitive pressure from the US. Korea took about 10,600t last month, down from 13,000t in August and 12,700t in September last year.

Year-to-date, Korea has taken 114,000t, only slightly down on the same period a year earlier.

In other markets, results last month were mixed, but generally reflected the impact of lower beef production in Australia.

Indonesia took 2881t in September, down 17pc on the previous month, and 38pc down on September last year. The past nine months has seen an accumulated 38,700t in beef trade, down 11pc on the previous year. COVID challenges in Indonesia have been a factor.

The Middle East region continues to struggle under competitive pressure from cheap South American beef, taking a little less than 3000t of Australian product, still a 16pc rise on August, and up 15pc on September last year. Calendar year trade has reached 20,400t, down 12pc on a year earlier.

Despite being our highest value per kilogram market, the EU continues to operate at a very low level by historical standards, taking just 465t last month, down 28pc on the previous month and 50pc lower than September last year. For the year to date, trade into the EU region has been less than 6700t.

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