US beef exports soar

US beef exports soar

ANALYSIS
Sales
Aa

US beef export volume soared in May to a record 133,440 tonnes, up by 68 per cent on year-ago level.

Aa

WHILE Australia's beef processing and export industry struggles with tight cattle supply and unprecedented high prices, the United States in contrast is moving up a gear in its export activity.

Latest United States Department of Agriculture data compiled by US Meat Export Federation (USMEF) shows that beef exports reached a new high in May.

Export volume soared to a record 133,440 tonnes, up by 68 per cent on year-ago level.

For the five months January to May, US beef exports tallied 587,838t, an increase of 15pc on same period last year.

By contrast, Australian beef exports, as reported in last week's column, reached just 422,000t for the six months ended June, down 24pc.

Commenting on the latest figures, USMEF president and CEO Dan Halstrom said that despite the COVID-related obstacles at all levels of the supply chain and an uncertain business climate, international demand had been very resilient.

The two biggest obstacles he was referring to were labour availability in the US processing sector and shipping bottlenecks in key ports coupled with a huge escalation in shipping costs due to container shortages.

On processors' own calculations, labour shortage is responsible for production running at around 10-15pc below capacity.

The big labour-shortage hit occurred last year as the pandemic escalated with the result of product shortage and a steep hike in wholesale prices.

Unfortunately some workers have not returned to the industry so the problem persists.

Also the plant closures or slow-downs last year meant a back-up of finished cattle in feedlots and a drop in prices to the production sector while meat was at or near record highs.

This resulted in producers seeing the problem as one of insufficient processing capacity and in consequence lobbying the government to do something to fix it.

That lobbying culminated in Friday's signing by President Joe Biden of a sweeping executive order to promote more competition in the US economy.

Reuters reported that the order, in part, would push the Agriculture Department to act to stop what the White House calls "abusive practices of some meat processors".

But it seems something of a carrot and stick approach as at the same time on Friday, Agriculture Secretary Tom Vilsack announced that the US government would invest at least $500 million to expand beef, pork and poultry processing capacity.

Again according to Reuters, the money would be in the form of grants and loans to meat processors to make the supply chain more resilient and increase competition in the sector.

On the waterfront, it is the California ports of Los Angeles, Oakland and Long Beach that handle about 50pc of US meat exports and it is these ports that are being confronted with a massive spike in imports from Asia causing a backlog of anchored container ships.

Pent-up demand in the US for consumer goods has pushed all three ports to record import levels which earlier this year saw as many as 40 ships waiting to unload.

A side effect of this is the build-up of empty containers and rather than wait for them to be filled with export goods, some operators are shipping them back to China empty so they can be refilled and turned around as quickly as possible with more consumer goods.

This has led to a decline in the number of containers available for agricultural exports from the US.

It is these factors that are rapidly driving up shipping costs.

As to US beef markets, it is Asia that fills the top three spots.

Despite the inconvenience of triggering safeguard in Japan and suffering snapback tariff rates for 30 days before the April new-year reset, the US trails last-year's cumulative tonnage to May by only 2pc.

Australia, by contrast, for six months to June is 19pc behind last year.

Korea is the second-biggest market for the US and is on a stellar trajectory with a record-setting 29,400t in May, which has pushed January-May volume 20pc above last year.

The US is fortunate that it has a very comfortable safeguard in its trade agreement with Korea, unlike the restrictive nature of Australia's.

China/Hong Kong slots into third place at 87,000t for January-May.

The China component of that figure is 64,000t which is 1200pc above last year.

May alone saw the US send more than 16,000t to China compared to just 1600t last year.

The US is now the largest supplier of grainfed beef to China.

Rising trend in grids and markets

ON the supply side, numbers in front of processors for the next two to three weeks look reasonable but then seem much less certain in the late winter and early spring months.

Processors responded late last week to the prospect of this dwindling supply pool with some hefty rises in grid rates.

In south east Queensland 5-10c was added to ox and 20-30c to cow taking rates for those who have repriced to 695/640c for four-tooth ox and heavy cow respectively.

But that was overshadowed by adjustments in southern states where an extra 20c has taken the ox quote to 715c and 20-30c more for cows has taken them to 650-660c.

Markets meanwhile are powering away like a runaway train.

Wagga on Monday had around 400 heavy cows which were quoted 7c dearer to a top of 375c/kg LW for an average of 357c.

That pushed the value for a good 700kg cow to $2500-2600 and some heavier types to over $3000 with DW equivalent rates working out to better than 700c/kg.

Overseas, Steiner's weekly report noted an escalation in US beef cow slaughter which since April has been tracking 2011 levels, a major liquidation year.

Despite the increased supply, lean beef prices continue to trade very firm at around 280c/lb which for the moment is helping to keep imported lean prices up.

However if the current US drought worsens and brings another 10,000-15,000 head per week into the kill as happened in 2011, demand for imported lean could be affected.

Aa

From the front page

Sponsored by