Beef and lamb airfreight options tighten

This is especially the case for the red meat industry, which saw an explosion in seafreight costs and a rapid decline in airfreight options after the pandemic hit.

One of the Federal Government programs put in place to address this situation was the International Freight Assistance Mechanism.

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Airfreight has always played an important role in the overall export freight strategy of the Australian red meat industry. The problem, however, for red meat has been that essentially all airferight shipments go by scheduled passenger aircraft, taking up any unused space in the cargo hold at discounted rates.

As a dense product, red meat has always been too heavy to pay the rates of dedicated airfreight services.

When the pandemic hit, normal passenger services wound down to almost nothing out of Australia and with it went the normal opportunities for shipment by air.

Airfreight shipments are usually much smaller unit sizes when compared to seafreight options. Airfreight cans or pods are designed to fit perfectly into the cargo hold of a plane. They come in different sizes and carry anything up to three or four tonnes of chilled beef or lamb but many meat shipments are half that size.

This compares with a 20 foot sea freight reefer container which will pack around 12 to 13 tonnes chilled.

Red meat by airfreight is nearly always a high value, time and temperature sensitive product that can better bear the extra cost that comes with airfreight. These can include special chilled shipments to supermarkets and restaurant groups around the world for which container loads by sea are too slow, unreliable in delivery and often too large in volume to handle in their specific business, especially where shelf life is an issue.

Air freight delivers product at its peak freshness and is often used for filling in between delayed shipments by sea for customers on long-term contracts.

The IFAM was put into place in April, 2020, to help keep international freight routes and flights operating out of Australia.

As countries and airports started to close down, IFAM supported the specialised airfreight corridors to continue to bring in medical supplies, equipment and other goods of national importance.

The outbound legs of these flights then provided the opportunity for high value meat products to continue to be exported to established markets.

The Government eventually committed over A$1.4 billion to the program which covered other agricultural products as well.

The last outbound charter and block flights for red meat under IFAM departed Australia on June 26.

Airfreight of red meat in 2019 before the pandemic, stood at around 107,300 tonnes for the calendar year.

Beef made up about 28 per cent of those shipments (29,540 tonnes). Lamb and mutton was the big user at over 58pc (62,223 tonnes) while pork shipments, mainly to take advantage of the unique opportunity to supply the fresh meat markets of Singapore, made up 10pc. Interestingly pork shipments have continued to grow over the period since the pandemic, now making up more than 20pc of shipments by volume while beef and lamb have borne the brunt of the reduced airfreight capacity with lamb shipments down by over 50pc.

With the onset of the pandemic, total air freight of red meat products fell by more than 20pc to 82,669 tonnes in 2020 and then by a further 20pc to just over 65,000 tonnes in 2021.

Without the support through IFAM, the fall in red meat airfreight shipments would have been much greater.

The airfreight environment however has now changed and costs have continued to rise. Some exporters report customers have started to get used to the higher transport costs and the higher sales prices that result but that appears to be reaching a limit.

The removal of the IFAM support from June 30 will impact cost and therefore volume.

Outbound passenger flights in recent weeks out of Australia have been around 900 to 1000 a week, up significantly from just 200 a week at its worst in 2020 but still way down on the close to 2000 or so outbound passenger flights a week that were operating before the pandemic.

With IFAM finishing, access to only half the flight options pre-pandemic and not enough to cover the volume looking for airfreight space will mean upward pressure on prices. There is also a suggestion that the current outbound passenger flights that are available are travelling with much higher levels of passenger baggage than before the pandemic so available cargo space for red meat shipments in each passenger aircraft appears to be less.

AMIC has lobbied both the Coalition before the election and the new Labor Government since, about the need to extend the IFAM program past June but to no avail.

Airfreight shipments of red meat usually carry with them the highest quality reputation of Ausralia's best performing beef and lamb products into the most prestigious restaurants and retail outlets globally.

How much of that will be challenged now by limited high cost airfreight going forward remains to be seen.

The changes in airfreight will only put greater pressure on sea freight options that are still being heavily influenced by port congestion, uncertain delivery schedules, container availability and high costs.

In recent weeks we have seen transport strikes in key markets like Korea, Germany and the UK, and the passage into law in the US of the Ocean Shipping Reform Act, highlighting the realities of the ongoing strain and pressure on transport logistics globally.

In the US the battle between the beef processing sector and the perception that concentration in plant ownership must be to the detriment of the beef producing sector has given birth to new legislative attempts to curb processor influence.

The US Senate Agriculture Committee has approved the Cattle Price Discovery and Transparency Act which authorises USDA to establish pricing mechanisms for live animal purchases.

They also approved the Meat and Poultry Special Investigator Act' which establishes a Special Investigator Office in the USDA to handle allegations of unfair marketing practices in beef and poultry.

Closer to home, market analyst Aginfo advises cattle slaughter numbers eased last week to around 91,000 head. Female slaughter in Queensland has risen with increased returns from co-products for beef processing due to a stronger fats and oils market.

The indicator USDA price for 90cl imported frozen Australian boneless beef was 289 US cents/lb ex-dock in what appears to be an oversupplied US lean beef market at present.

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