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Mixed results for live exports

16 July 2020

Key points:

  • Australian feeder cattle exports to Indonesia are down 16% for the calendar year-to-June
  • Demand for locally processed beef in Vietnam is high
  • Live sheep exports remain a key pathway for the Middle East as chilled carcase exports are impacted by COVID-19 travel bans

Cattle exports in June totalled 124,000 head, which is the largest volume of cattle shipped since November last year. For the year-to-June, total cattle exports are back just 1% on 2019 levels. Sheep exports for the year-to-June total 582,000 head, back 17% on 2019 levels.

Indonesia

Australian feeder cattle exports to Indonesia total 254,000 head for the year so far, down 16% on 2019 levels. Despite IA-CEPA tariff reductions, mixed market signals and see-sawing prices have resulted in importers being more cautious about buying in large numbers. The current feedlot cattle price is Indonesia rupiah (IDR) 42,500/kg live weight (at an IDR exchange rate of IDR 14,500/USD), and the price of fresh beef at IDR 115,000-120,000/kg.

The Ramadhan and Eid al-Fitr festive season was a strong sales period for Indonesian feedlots, as the majority of Muslims celebrated with close family in the Greater Jakarta area, a major market for fresh beef. Travel restrictions also meant workers and students remained at home, resulting in more household cooking. Indonesian feedlots are currently running at 55-70% capacity, with 116,000 cattle currently on feed. June imports were high at 67,000 head, with importers looking to restock their cattle inventories after recently depleting stocks. 

This year there has been limited supply of Indian Buffalo Meat (IBM) into the Indonesian market due to COVID-19's impact on Indian processor operations. However, it is expected that around 10,000 tonnes of IBM will now come monthly until the end of 2020. This will likely heighten competition for market share, which could see the price of fresh beef soften.

Vietnam

Cattle exports to Vietnam are up 39% for the year-to-June, at 166,500 head. Relative to total cattle exports to Vietnam this year, slaughter cattle have accounted for 81%, while feeders account for the remainder, representing a slightly higher proportion than typically seen in recent years as importers look to weight gain to boost margins.  

Vietnam has done a remarkable job at controlling COVID-19, therefore the current restrictions placed on the local population are now minimal. However, international visitors are still banned from entry, so businesses associated with tourism and international travel are still disadvantaged. This has been somewhat compensated for by an increase in domestic travel, but ongoing impacts on premium food service will continue. Australian beef exports to Vietnam were subdued through April and May, which has created an opportunity for locally processed beef to fill the supply gap, hence the lift in imported cattle in the past two months.

Investment over the past four years from a core group of importers has meant that cattle supply chains have benefited from greater levels of resilience to the impact of COVID-19. These importers have ensured that the trading of cattle remains consistent despite the threat of disruptions.

Cattle movements across Vietnam borders have been limited, given restrictions on travel to control the spread of infection. This means that much of the grey channel trade with China is now being conducted via official channels. Australian cattle exports to China are now up 12% for the year-to-June, although the control of grey channel trade may only be a small contributor to this growth, with ASF-fuelled demand in China likely being the predominant factor.

Middle East

Year-to-June sheep exports to MENA are down 13% from 2019 levels, with the downturn in foodservice demand a key influence in the decline. Volumes of sheep and sheepmeat to the UAE are both back on 2019 year-to-June levels. Despite softer demand, food security has been a key focus of many MENA markets during the COVID-19 outbreak, although a number of other factors can be attributed to softening sheepmeat demand in the Middle East.

Air freight restrictions during the COVID-19 pandemic have demonstrated the importance of the live sheep export industry for the Middle East. Kuwait imported significantly less chilled carcase during the pandemic (-50% on 2019 levels for the year-to-June) with a greater reliance on live imported sheep to meet the somewhat lessened demand, with volumes back just 3% on 2019. Sheep exports to Jordan are just 8% behind 2019 levels for the year-to-June, while the chilled carcase trade has dropped 59% on 2019.

In contrast, Qatar airways have continued to run flights from Australia, which has maintained the flow of chilled carcase sheepmeat, now up 1% for the year-to-June. Consequently, Qatar hasn’t needed to look to live exports like other markets have, with sheep exports to Qatar now back 29% for the year.

The summer shipping prohibition is now in place from June through to mid-September. This policy is driving importers to seek livestock from alternate sources as they look to diversify their supplier base. Competition from South Africa is growing in Kuwait and Oman, while Romania continues to be the main competitor in Jordan. 

For more detailed figures and information, check out the latest edition of LiveLink.

© Meat & Livestock Australia Limited, 2020