Global beef market: more dramas than a soapie

Languishing United States import prices on the back of increased overall grinding beef availability is starting to put a dent in a market that had been an encouraging story for Australian processors this year.

Reports about competitor beef exporters keen to secure orders from the US being willing to offer significant discounts are now starting to flow through from Australian processors, which is bad news at a time when their supply is finally starting to lift.

Meat and Livestock Australia analysts report a 3 per cent fall in total beef export returns in May was largely attributed to a decline in volume to the US in excess of 20pc, along with the appreciation of the Australian dollar.

On the other hand,  the increasing of tariffs on US frozen beef exports to Japan, from 38.5pc to 50pc until March next year, should deliver a solid competitive advantage for Australia in one of the few markets where we actually recorded growth in the value of shipments in the latest figures.

Japan accounted for the largest share, at 27pc, of Australian beef export returns for May, lifting 16pc year-on-year to $184.74 million, according to MLA analysts.

Just what the balance of these dynamics will be is impossible to pin down, particularly in conjunction with other events including the suspension by China of six Australian red meat plants and ongoing impacts of Indian buffalo meat in Indonesia.

Rabobank senior analyst animal proteins Angus Gidley-Baird said US imported 90CL prices had been travelling upwards all year until the start of July.

In US cents per pound, 90CL prices  started the year just under 200c and rose to 219 by the start of July. Or in Australian dollar terms, they sat at $5.49 cents per kilogram in January, compared to $6.58c/kg on July 6.

That was largely a reflection of shortage in Australian product but strong growth in beef consumed in US did play a part, Mr Gidley-Baird said.

“Add to that, the US’s ability to export large volumes this year has seen favourable demand for the that 90CL import price,” he said.

MLA reports the imported 90CL beef indicator has since fallen to to US204 cents per pound.

As US producers head into winter and look to offload cows there is always a natural increase in local 90CL production, Mr Gidley-Baird said.

Combined with Australian supply starting to come back online, there is clearly an unwillingness to purchase forward as bigger volumes are expected.

Meanwhile, the influx of cheap Indian buffalo meat is making market conditions for livestock exporters very challenging.

Indonesia is Australia’s largest live cattle market.

Industry-gathered figures put Australian cattle exports for the first six months of the year to Indonesia down 29pc year-on-year.

Mr Gidley-Baird said there were reports that all the initial quota of Indian buffalo - which was allowed in by the Indonesian Government mid last year in an attempt to reduce beef prices - may not be exhausted yet, meaning stocks may still be on hand.

“And there is anecdotal information there is penetration in higher population areas,” he said.

This would mean less demand by local meat retailers for fresh Australian beef.