Korean beef safeguard to trigger this week

Korean beef safeguard to trigger this week

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IMMINENT: Triggering the Korean beef import safeguard has become a final-quarter ritual for Australian beef exporters.

IMMINENT: Triggering the Korean beef import safeguard has become a final-quarter ritual for Australian beef exporters.

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Ken Wilcock notes that once triggered, the current-year 21.3pc tariff reverts to 30pc until December 31, 2020.

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TRIGGERING the Korean beef import safeguard has become a final-quarter ritual for Australian beef exporters with this year's tariff-impacting mechanism set to trigger any day now according to latest advice from MLA.

The casual observer might wonder how that could be when this year's safeguard is set at 174,087 tonnes and Department of Agriculture progressive statistics for the calendar year to October show just 127,900t exported.

The answer to that riddle lies with the fact that the figures that matter are those compiled by the Korean authorities on cleared product entering the country.

Any product cleared through Korean customs on January 1 would have been exported in the latter part of the preceding year so immediately there is going to be a difference between one country's export figures and another's count of cleared imports.

The other factor is that once safeguard is triggered, any carry-over product is counted against the following year's safeguard allocation.

With Australia triggering safeguard each year since KAFTA (Korea-Australia FTA) came into effect, the addition of this carry-over product together with increasingly strong trading volumes has caused the trigger date to creep forward despite increases each year in the safeguard volume.

In 2015 safeguard was triggered in November and each year from 2016 to 2019 it crept forward into October.

This year tonnage has generally been down by 5-6 per cent so that has served to push the trigger back into November.

Once triggered, the current-year 21.3pc tariff reverts to 30pc until December 31, 2020.

That is an 8.7pc price hike which importers must either accommodate in their downstream trading or pass back to Australian exporters. Alternatively at this late stage of the year, they may also consider holding product in bonded storage until January 1, 2021 when the tariff rate resets to 18.6pc.

But of course Australia does not enjoy the Korean market in isolation.

Major competitor the United States has a 5.3pc tariff advantage because they got their FTA into place two years earlier than Australia. The current relative disadvantage vis-à-vis the US once safeguard is triggered is therefore 14pc.

Unfortunately this relative disadvantage does not improve over the remaining time frame of the gradual wind down to zero tariff in 2028 under KAFTA. In fact it gets substantially worse.

Major competitor the United States has a 5.3pc tariff advantage because they got their FTA into place two years earlier than Australia. The current relative disadvantage vis-à-vis the US once safeguard is triggered is therefore 14pc.

Australia remains at risk of triggering safeguard because the trigger level increases by only 2pc per year which effectively caps exports at 180,000-200,000t for the next eight years.

In contrast the US is unlikely to ever trigger safeguard because of the much higher trigger level (318,000t in 2020) established under the Korea-US Free Trade Agreement (KORUS).

While there may be a tendency to think the US trade negotiators may somehow have been better at their task than their Australian counterparts, the reality is that essentially the same formula for establishing safeguard was applied to both trade deals.

According to MLA, the US safeguard volume under KORUS was calculated using the average of 2002-2003 US export volumes to Korea plus an additional 10pc increasing by 2pc annually.

For KAFTA, the average of 2007-2009 Australian beef exports to Korea was applied plus an additional 10pc increasing by 2pc annually.

The reason why the US achieved a much higher safeguard volume than Australia was the record high volumes of US beef exported to Korea just prior to the 2004 suspension of US beef into Korea following an outbreak of bovine spongiform encephalopathy (BSE).

Unfortunately Australia's very high cost of production at present due to record cattle prices is making it very difficult to defend its stake in the Korean market.

Some loss of share to the US would seem inevitable.

EC says it's now okay to eat beef

PERHAPS convinced that EU member states are now well enough advanced in agricultural practices that are beneficial to the climate and the environment while at the same time maintaining the highest of animal welfare standards, the EC has now seen fit to support a campaign that will attempt to counter the marginalisation of meat consumption with a message to European consumers that it is okay to eat beef.

Called 'Become a Beefatarian', the (e)4.5m project which Brussels has agreed to finance 80pc will promote the European beef sector in France, Germany, Belgium, Portugal and Spain.

Across media, social networks, food trade and hospitality channels, the campaign will focus on the value proposition of the European product compared to that of third countries insomuch as its high quality coupled with sustainability, environmental and animal welfare credentials.

Seasonal closure dates

WITH harvest now in full swing in the southern states, getting cattle to market will likely take a back seat and numbers can be expected to drop in centres that draw heavily from mixed farming country.

Wagga on Monday was back 500 head but nevertheless put together some handy numbers of heavy steers and bullocks and good run of heavyweight cows.

The heavy steers held ground at 390c/kg average with a top of 412c. Bullocks were back 8c at 370c average and the cows were 2c better at 318c.

In Queensland, light weight yearling steers and heifers are dominating yardings whereas in the south there is hardly a yearling to be seen under 400kg.

Heavy cows at Dalby last week maintained a dearer trend with a good sample averaging 323c and a top of 340c.

Across all the majors, grid rates are unchanged.

Southern and central Qld indicators for 4-tooth ox and heavy cow remain at 680c and 615c/kg respectively while southern NSW and South Australian indicators for the same categories remain at 635c and 580c.

Seasonal closure and recommencement dates at this stage are as follows:

Mackay: December 18/January 4; JBS Rockhampton: December 18/TBA; Teys Rockhampton: TBA/TBA; Biloela: November 19/TBA; Oakey: December 18/January 4; Dinmore: December 17/TBA; Beenleigh: statutory holidays only; Wingham: December 17/January 4; Tamworth, Wagga and Naracoorte: statutory holidays only.

Other dates as they come to hand.

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