DESPITE industrial activity affecting Australia's ports, January got off to one of the hottest beef-export starts seen in many years.
With the usual plant closures and slowdowns over Christmas, it follows that January is the low-volume month of the year except in circumstances of severe drought when supply may overwhelm slaughter capacity in the closing weeks of the year and carry over into January.
This happened in 2019-20 when January export volume rose to 79,000 tonnes but the January volume this year of 75,585t was not drought driven. There was a dry pinch in August-October last year and a lot of talk about El Nino but that changed with good rain in November and December.
Considering the average January volume since 2012 (including 2020) was 58,000t, it begs the question of what is driving this current surge.
The first and obvious thing is that there are plenty of slaughter-ready cattle in the system.
MLA weekly slaughter figures, while not fully inclusive, provide a snapshot of slaughter trends over the past three years.
This year by mid-January, weekly slaughter had reached 116,000 head. Last year it took until the end of March to reach that level and 2022 failed to reach that level at all; the best it achieved was 107,000 head in early December.
The core rebuild years from mid-2020 through 2022 were a grim time for processors due to supply-driven high prices for both immediate slaughter and feeder cattle but against that was the surety that herd growth would ultimately deliver improved supply and lower prices.
That phase of the cycle started to emerge in the latter part of 2023.
By early June, weekly kill had reached 124,000 and by late October it was 132,000. The dry pinch probably accentuated the process, but the upward supply trend continued despite November/December rain with the high point for the year occurring mid-November.
Processors were optimistic at the time that this would lead to numbers for first quarter 2024 and that optimism now seems well founded.
But as well as having cattle, another issue was having the capacity to process them.
Dogged by labour shortages that persisted well after COVID had largely abated, processors were starting to see daylight by 2023. Throughput numbers per shift were being rebuilt, recruiting and training for reinstatement of shifts got under way and new and refurbished sites such as TFI's Murray Bridge were coming into play.
Fortunately, none of these gains was brought undone by the DP World industrial problems on the wharves.
Media reports painted a grim picture for container movements, but processors reported they were not greatly affected in getting product offshore. While not ideal, workarounds with other stevedore companies allowed product to move.
Volumes to all major markets were up on previous year but the United States was the standout by far.
Its January volume was 20,308t, up a massive 11,355t or 126 per cent.
This follows on from an upsurge to the US which began in mid-2023. Prior to that, trade had been very restrained with 2022 averaging just over 11,000t per month, the lowest level seen in more than 20 years.
By Q4 last year, monthly volume was averaging better than 27,000t.
But it is not only Australia that has stepped up its supply of grinding beef into the US. New Zealand, Brazil and Nicaragua are all responding to the same fundamentals: a double-digit decline in cow/bull slaughter limiting US domestic lean beef production and a cattle inventory survey confirming the smallest US cow herd in 70 years.
US domestic 90CL boneless has pushed up to almost US300c/lb which in turn has led to a US10c/lb (FOB) spike in Australian 90CL. The push of import product into the US is so strong at present that Brazil is expected to fill the 2024 'Other Country' quota of 65,000t it operates under within a matter of weeks.
Japan also showed a strong lift in volume on a year-to-year basis. Its January tonnage of 16,331 was up by 4300t or 36pc.
Hopefully this is a sign that processors are on the way to turning around the 2023 market low point of 206,000t.
China also recorded a strong year-on-year rise of 3500t or 33pc, which makes the 14,100t January volume the second highest since trade began in 2012.
At 11,682t, Korea recorded its highest January volume in the past 12 years, but the year-on-year increase was relatively modest at 1500t.
With only a small 2pc yearly increment in volume under the FTA, safeguard will continue to be an impediment to growth in this market. Triggering the 2024 safeguard volume of 188,437t will cause the tariff on Australian product to jump from 10.6pc to 24pc.
In secondary markets, the promising growth shown by Indonesia from 39,000t in 2022 to 68,000t in 2023 suddenly stalled in January with a volume of just 341t.
Administrative inertia due to Indonesia's general election being held on 14 February 14 appears to be holding up import permits for certain foodstuffs. Australian cattle and beef are affected.
Also showing little sign of life is the much-anticipated UK market which came into contention on June 1 last year when its FTA with Australia, the first trade agreement signed since leaving the EU, entered into force. Just 237t nearly all chilled beef was exported in January.
Supply building, rates easing
CATTLE are now being put up to the works in number as weather disruptions abate, causing rates once again to come under pressure. Monday saw 10c/kg off the majors' grids bringing YP ox to 570c/kg and heavy cow to 510 with bookings now into the first week of March.
On the processing side, Dinmore will resume its second shift next week.
Currently doing 1700 head five days per week, the new arrangements will initially see 2403 head per day four days per week, Monday to Thursday. Second shift numbers are expected to build as skill levels develop.
Overseas, Steiner reports a further US2c/lb (FOB) rise in imported 90CL. With US domestic 90CL climbing above US300c/lb, buyers are now more confident bidding on imported product.