7.9-10. Australian cattle industry projections - beef exports European Union and Middle East
7.9 European Union
The potential for Australian beef and veal exports to the EU for 2012 is somewhat mixed. On the supply side of the ledger, Australian exporters have increased access to the market through the expanded EU grainfed quota, with accredited Australian production also reportedly increasing steadily. The very weak economic situation and poor consumer sentiment across the EU, combined with the currency weakness, is expected to weigh upon EU demand (and prices) for all imported beef products.
In early January 2012, the euro currency fell to its lowest level on record against the A$, in the wake of the economic and debt issues across the region. Given the economic outlook for 2012, the historically low value of the euro is anticipated to continue. It could even weaken further, depending upon developments throughout the year, especially in financial markets.
Reflecting the weakness of the EU market throughout the past year, and accentuated by the currency, the EU has returned to being a net exporter of beef – even though total beef production has fallen considerably since the subsidy-driven highs of the 1990s. Amazingly, the available returns for many cuts of beef in markets outside of the EU were greater than inside – with a surge in beef exports to Turkey, Russia and surrounding countries, while Europe’s live cattle shipments to the Middle East also rose.
Even with the economic turmoil throughout the EU in 2011, Australian beef and veal exports increased 30% year-on-year, to 12,836 tonnes swt – the highest annual volume since 1998. Interestingly, there was a very similar volume growth for both grainfed (assisted by the increased quota) and grassfed beef in 2011. According to DAFF statistics for 2011, Australian grainfed beef exports increased by 1,679 tonnes swt on the previous year, while grassfed shipments increased by 1,274 tonnes swt.
As a percentage of Australian exports for the year, grainfed beef increased to 33% in 2011, compared to 22% in 2010 – highlighting the benefit from the expanded grainfed beef quota. Of the major Australian beef cuts sent to the EU in 2011, 22% of total shipments were topside/insides, while sirloins, rump and silverside/outsides made up 16%, 14% and 14%, respectively.
In 2012, Australian beef and veal exports to the EU are forecast to increase a further 17% on 2011, to 15,000 tonnes swt. The increase for the year is largely attributed to the increased access for Australian grainfed beef, along with continued tight supply and high prices of product from South American suppliers. Additionally, EU beef production is expected to contract 2.8% in 2012 (GIRA), with increased operating costs and higher prices in 2011 pulling many cattle forward that would have otherwise been processed in 2012.
Even at 15,000 tonnes swt (or 22,125 tonnes cwe), Australian beef makes up an extremely small portion of the total EU beef market. According to the United States Department of Agriculture (USDA) total EU-27 beef consumption in 2012 is forecast to be 7.91 million tonnes cwt – giving Australia an estimated market share of 0.3%.
Over the longer term, the potential for Australia to increase its shipments to the EU remains, but is difficult to assess fully given the current economic and currency turmoil in the EU. It is expected that the number of Australian grassfed and grainfed cattle available to be slaughtered for this market will continue to expand – helping to relax the supply issues of previous years.
7.10 Middle East
Australia’s beef and veal trade with the Middle East continued its rapid growth throughout 2011, with exports for the year increasing 31% on the previous year, to a record 31,862 tonnes swt. This is double the volume that the market took in 2009 (15,800 tonnes swt) and 260% above the decade average (8,921 tonnes swt) for 2001-2010.
The growth in exports for 2011 was widely spread, even between chilled and frozen beef. Australian chilled beef exports to the Middle East were up 31% on the previous year, while frozen shipments kicked 30%, to 17,292 tonnes swt. With this spread of chilled and frozen beef, Australian beef services a range of market segments, from lower priced manufacturing product for fast food outlets and catering businesses, to the very top end of the food service and exclusive luxury hotel trade.
While for the purpose of MLA’s beef and cattle projections the Middle East is treated as a collective region, in reality it is made up of a diverse range of markets for both chilled and frozen beef.
The largest markets for Australian product within the Middle East in 2011 included the United Arab Emirates (UAE) (7,367 tonnes swt), Jordan (6,160 tonnes swt), Saudi Arabia (6,017 tonnes swt) and Kuwait (3,541 tonnes swt).
While almost 45% of Australian beef that goes to the UAE is chilled, and 26% of that to Jordan, very little chilled product enters either Saudi Arabia or Kuwait, which prefer cheaper frozen beef.
Of the frozen product shipped to the region during 2011, manufacturing beef made up 53% of total exports, with the main markets for this including Saudi Arabia, the UAE, Kuwait and Jordan. Following manufacturing beef, the second and third most popular frozen beef cuts were carcases (11%) and topside/insides (11%). For the frozen carcase trade, Saudi Arabia was the main market, with substantial volumes also distributed to Jordan, Kuwait and the UAE.
Of the higher priced chilled trade to the Middle East in 2012, the major cut shipped was topside/insides (38%) – that were destined for Jordan, Lebanon and the UAE. The second most popular cut was thick flank and knuckle (21%), with the majority of shipments to Lebanon.
With robust economic growth and expanding populations, combined with a very limited ability to produce their own product, the Middle East beef markets have grown considerably in recent years. While Australia has been able to capture some of this growth, Brazil has increased shipments to the region the fastest, pulling product away from many of their traditional markets.
Demand for imported beef across the region is anticipated to continue to expand impressively in coming years. Even with an increase focus from Brazil, all of the world’s major beef exporters will be looking towards further expansion in trade to this region.
In 2012, Australia’s beef and veal exports to the Middle East are forecast to increase 10%, to 35,000 tonnes swt. Most Middle Eastern markets are comparatively well placed to be able to absorb the anticipated higher global beef prices in 2012 and sustain beef import growth – both from Australia and other suppliers.
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