LATEST global export figures show that China is still drawing in large quantities of beef particularly from South America but overall the current recovery from the country's second wave of COVID-19 may not be as strong as the bounce-back after the first wave and overall total import volumes may now be trending lower than the monthly peak established in Q4 of 2020.
As noted by Dr Ross Ainsworth in a recent edition of his Southeast Asian Beef Market Report, live cattle rates in China have been falling since their October 2020 peak which happened to coincide with China's announcement that it had overcome the worst of ASF and that pig herd rebuilding was well under way.
Those claims were met with scepticism at the time but the price of pork started a fairly dramatic fall in February 2021. That development posed two possibilities: either the claims were correct and the pig herd was well into recovery or the sporadic second wave outbreak of ASF was inflating supply through pigs being marketed ahead of possible loss to the disease.
Industry has since been expecting the softer pork prices to flow through to beef prices and demand but the first half of 2021 has shown no sign of this happening.
However Steiner's latest report provides some indication that this may be starting to change.
What Steiner's graph shows is that in the months since the February low-point of China's second-wave COVID slump, the rate of recovery in export volumes from Brazil, Argentina and Uruguay is significantly flatter than the almost vertical recovery rate from the first-wave slump.
Then in June after their export control announcement, Argentina's exports to China dropped by almost 19,000 tonnes.
This was effectively matched by Brazil increasing their exports by 14,700t and Uruguay increasing theirs by 3900t so there was no overall increase or decrease in South American volume to China in June, just a flat line on the graph.
Similarly the United States supply to China in June was flat line and Australian exports fell by 2000t.
Brazil and Uruguay have since posted gains in July but no comparable figures are yet available for Argentina to establish a net South American position. Australia posted a modest 500 extra tonnes.
As indicated above, this flatter recovery is in strong contrast to the rapid and complete bounce-back after the first COVID wave.
This could mean that the underpinnings of demand are still in play and that it will get back up there but take longer due to other supply-related issues such as shipping and port congestion, or that there simply isn't the momentum now to pull the line on the chart back up to where it was.
Prior to decimation of the Chinese pig herd in 2019, none of the then four major beef exporters to China were doing 40,000t a month.
Brazil was occasionally in the high 30s, Argentina in the low 20s, Uruguay and Australia generally well under 20 and the US effectively zero.
Since then Brazil has reached monthly volumes in the mid-90s and Argentina mid-50s while the US has surpassed Australia with 15,000t per month.
While it would seem highly improbable for China to revert to pre-2019 beef import levels once the pork supply situation fully recovers, it does seem likely there will be some adjustment off the extraordinarily high import levels brought about by the ASF outbreak.
It's really just a matter of when.
USDA issues new cattle market reports
IN response to President Joe Biden's executive order on promoting competition in the American economy, the US Department of Agriculture has issued two new market reports that it claims will provide additional insight into formula cattle trades and help promote fair and competitive markets.
The president's executive order directed USDA, among other things, to enhance price discovery, increase transparency and improve the functioning of the cattle market.
The first new report, the National Daily Direct Formula Base Cattle, will provide greater information into the foundational prices used in cattle market formulas, grids and contracts. The second report, the National Weekly Cattle Net Price Distribution, will show the volume of cattle purchased at each different level of pricing within those formulas, grids, and contracts.
USDA claims the first new report will enable stakeholders to see the correlation between the negotiated trade and reported formula base prices as well as the aggregated values being paid as premiums and discounts.
The intent of the second new report is to show at what levels (price and volume) trade occurred across the weekly weighted average price for each purchase type: negotiated, negotiated grid, formula and forward contract.
Currently, the market speculates whether large or small volumes of cattle trade on both sides of the price spread. Publishing a price distribution for all cattle net prices will offer more transparency to each of the purchase type categories.
USDA has published a similar net price distribution report for direct hogs since January 2010.
Five-day kills into September
SURPRISINGLY Queensland processors are getting through the toughest supply months of the year with five-day kills.
With cattle in front, these full weeks look set to continue at least into the first week of September.
In the south it is different with Wagga and Naracoorte looking like a five-day/four-day alternation at this stage but there are also reports of two to three days at other plants.
There is little or no change in grid rates with the Qld majors on 710-715c/kg for 4-tooth ox and 655 for heavy cow.
Some feeder rates however are reported back 10 cents because placements now will hit the Christmas period when they are ready to go. Grain prices are also up on revised global production estimates.
On the plus side the dollar continues to fall with analysts now predicting it will soon drop under US70 cents.
In the US, trim continues to strengthen with the FOB East Coast price for 90CL blended cow up another 1cent to US280c/lb.
