Global wrap with Michael Finucan
01 November 2018
This month I was in the US and attended the Meat Import Council of America’s annual conference. Len Steiner, founder of commodity trading consultants, Steiner Consulting Group, gave a detailed account of the US and global meat markets. One of the key underlying themes was the wall of US meat – pork, chicken and beef – that is on the market. On a positive note, the US economy is performing well, with high employment and a general positive sentiment, which is great for meat consumption. However, one risk is the potential impact of US retaliatory tariffs on China and concern this will disrupt trade flows of meat. A positive for the Australian industry is the ongoing demand for high quality grassfed beef in the US, which continues to grow.
With US beef production forecast to expand 4% in 2019 on top of 3% this year, their ability to export has increased significantly, at the same time as Australia’s export volumes have increased due to higher drought induced turn-off, as per this month’s cattle projections update. Increased beef production, a softer Australian dollar and robust demand fundamentals, particularly in established Asian markets, underpinned a 9% increase in forecast beef exports in 2018, to 1.1 million tonnes shipped weight (swt). Despite increasing global competition, beef exports for the calendar year-to-September grew 12% year-on-year to 840,500 tonnes swt. On the back of record grainfed cattle turn-off, exports to Japan and Korea have recorded increases of 7% and 15% respectively.
The strength of Japan, Korea and China highlights how important these markets are for Australia. While Korea has performed well, Australia hit the import quota safeguard this month, causing the tariff to snapback from 26.6% to 40% for the remainder of the year.
Also this month, we look at the competitive environment in the China market and the rapid increase in imported beef volumes. For Australia, year-to-date exports are up over 50% to China, with an increase in manufacturing product driving a large proportion of this. However, a significant positive is the dramatic increase in the volume of chilled (up 96% year-to-date) and grainfed product (up 88% year-to-date), demonstrating that Australia continues to be the major premium supplier to high end retail and restaurants.
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