MAY beef export figures just released by Department of Agriculture were notable for the fact that the total fell well short of the expected figure indicated by a progressive count of shipments in the first two to three weeks of the month.
On each update from the department it looked certain that well over 100,000 tonnes would be achieved but the final figure came in at just 98,565t.
Interestingly the first four days of June show an unusually high count so it would appear that something has happened to interrupt the flow of product in the latter part of May.
One possible explanation is the suspension China imposed on four major beef plants in mid-May.
It is understood that some product on site or on wharf may have been redirected to the few alternative markets that would accept Chinese labelling but that a significant proportion of product in the pipeline for China had to be brought back in to be reworked.
The delay in getting that product on the water offers some explanation for the low May result and subsequent spike in early June and gives some indication of just how costly trade intervention of this nature can be.
That aside, what is surprising about export tonnage for the first five months of this year is that it trails same period last year by just 2.5 per cent on the figures as they stand.
Why that is significant is that 2019 was the biggest export tonnage year since 2015, a result very much driven by an exceedingly high level of herd liquidation.
Given the present estimated low level of the national herd, there would seem only one way that this high level of exports could be achieved and that is through a continuation of herd liquidation.
Australian Bureau of Statistics figures add support for this notion.
Latest figure for female percentage of the kill is 54.7pc for the month of April (ABS being one month behind in their data).
That compares to 58pc for April 2019 and averages of 50.6pc and 49.4pc respectively for the big female sell-down years of 2014 and 2015.
One major multi-site processor I spoke to confirmed they are seeing a lot of cows coming through particularly in north Queensland.
The ABS figures suggest we are not even close to the point of transition into a nett herd rebuild phase and yet the prices being paid in the market at present for replacement females are wholly consistent with full-on herd rebuilding.
While that might seem incongruous it is largely explained by regional variability in one factor, weather, a far simpler explanation than the complex interrelationship of moving parts that has wrought dislocation on domestic and global beef markets since late last year.
Unfortunately some of those factors seem set to continue to influence the global market, particularly in the United States.
Foremost among these is the time frame for a return to more normal levels in fed and non-fed cattle slaughter, clearing the backlog of fed cattle that built up during COVID-19 related downtime at slaughter and associated fabrication facilities and for foodservice to make a complete comeback.
To add a few more moving parts to the mix, analyst Steiner Consulting has warned of the possibility of expanding drought conditions in the US pushing more cows than normal to slaughter.
As well it warns of strong growth in lean beef imports from Brazil and Argentina, countries whose product trades at a big discount to Australian and New Zealand beef.
In the meantime, high US wholesale beef prices that underpinned recent demand for lean grinding product have come right off the boil. They are now 47pc lower than the peak in early May.
The ABS figures suggest we are not even close to the point of transition into a nett herd rebuild phase and yet the prices being paid in the market at present for replacement females are wholly consistent with full-on herd rebuilding.
In consequence, the price of fresh US domestic lean has fallen, which in turn has caused a considerable slowdown in imported beef market activity.
That means Australia's spike in tonnage to the US from just 15,000t in April to 20,517t in May might be very short term.
On the flip side of the coin, the US as a major competitor to Australia in premium world markets is making the most of reduced tariffs under its recently implemented US-Japan Trade Agreement.
According to US Meat Export Federation, US beef exports to Japan in April totalled 31,280t, up a massive 30pc from a year ago.
This has taken the US into record territory in this market for January/April volume with a tonnage of 114,152.
In contrast, Australia exported 23,850t to Japan in April and followed up in May with 23,495t.
This took our progressive four-month count to April to 92,626t and our May five-month figure to 116,121t, only marginally ahead of the US four-month figure.
In the Korean market, April exports from the US were down on year ago levels but the four-month progressive count was still up overall by 6pc.
This is explained by Korea only easing its social distancing and stay-at-home requirements in early May which is expected to result in a significant increase in domestic travel and foodservice demand.
The processor contact noted that US production has now ramped right up again and with heaps of product coming through they are set to make life very difficult for Australian operators in the Asian markets in the weeks ahead.
Meanwhile supply remains tight for Australian processors and that would normally suggest a hold on current grid rates but the dark clouds forming as discussed above and a strengthening Australian dollar are not helpful.
Southern Queensland rates are currently 620c/kg for 4-tooth ox and 540c for heavy cow.
Indicative rates in the south at Wagga and Naracoorte are 615c and 560c respectively.
With Queen's Birthday holiday on Monday there is no guidance from early markets in southern states this week.
Prior week activity however showed a noticeable easing in cow rates bringing them generally into alignment with hooks rates.
A similar trend was evident in Queensland saleyards.
