7 Australian cattle industry projections - beef exports
An increase in beef production, combined with a continued growth in import demand in the US and non-traditional markets, should contribute to a 2.7% increase in Australian beef and veal exports for 2012, to 975,000 tonnes swt – a record calendar year total. The fastest growing markets for the period are anticipated to be the US and Russia, which will help to offset expected declines to Japan and Korea.
The proposed 2.7% increase in shipments for 2012 follows 2.8% growth in 2011 – which was achieved through some very tough trading conditions. Some of these conditions may ease in 2012, particularly the tight Australian supply and appreciation in the A$. The 2.7% rise is predicated upon growing demand in developing markets and a shortage of beef in key exporting nations, which will push global beef prices higher.
However, there are some major competitive trade issues set to impact Australia’s beef trade in 2012, namely the increased influence of US beef in Japan and Korea and continued high A$. In Japan, possible changes to the import protocol for US beef in the second half of 2012, from less than 21 months of age to less than 30 months, may increase available supplies from the US and make the going tougher for Australian beef in Japan.
The recent signing of the US and Korea Free Trade Agreement (FTA) will deliver US beef a competitive advantage over Australian beef into Korea. This is expected to accentuate the existing competitive pressure from the US, stemming from their weak currency and ability to ship large volumes of short ribs. Countering this, however, is continued unease by some consumers with US product.
Australian beef and veal exports finished 2011 at 949,192 tonnes swt, up 2.8%. This was a commendable result given the series of unprecedented events that occurred through the year. Flooding throughout Queensland disrupted shipments early in the year, while the Japanese market was hit extremely hard by the series of disasters which commenced with the massive earthquake in early March. Global economic uncertainty continued to add volatility to global commodity markets, with very low consumer demand in Australia’s two largest markets – Japan and the US.
Added to these “big picture” external shocks was the run of the A$, which saw it hit a post-float high of 110.5US¢ in late March. Averaging 103US¢, the A$ acted as a major handbrake upon the export industry between April and August, when the global beef trade hit a flat spot. Accentuating the impact of the high A$ was the very weak US currency, which enabled US beef to gain competitive leverage in most markets, especially Japan and Korea.
In previous years, the thought of the A$ not only surpassing parity, but averaging 3¢ above it for the year would have brought huge concerns for the beef industry and export volumes. However, the global shortage of beef, along with burgeoning demand in non-traditional export markets, helped to offset much of its impact, especially for cheaper frozen manufacturing beef.
However, it must be noted that the high A$ has made it very difficult to shift higher priced loin cuts into traditional markets – especially when combined with the sluggish demand in key export markets, most notably in Japan.
Clarifying the influence of non-traditional markets in 2011, Australia’s beef and veal exports to the two largest markets of Japan and the US totalled 510,005 tonnes swt - a decline of 6% on the previous year and 53.7% of total exports. This was the lowest annual percentage since 1977.
Shipments to all other markets in 2011 increased 15% year-on- year to 439,187 tonnes swt, including an 18% increase in beef exports to Korea. In contrast, 81.3% of total Australian beef and veal exports went to Japan and the US in 2004.
With Australia’s cattle herd and beef production increasing beyond 2012, Australian exports seem set to reach one million tonnes swt by 2013. Exports will continue to absorb the majority of the increase in production through to 2016, as a result of a lower A$, improved economic conditions in traditional markets, a continued global beef shortage and, hopefully improved access to a number of markets.
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