By Augusto Semmelroth | Source: DAFF, MLA, Steiner
The sharp slowdown in cattle slaughter, coupled with softer import demand from the US, led to a major contraction in beef exports in October. Although shipment volumes remained slightly above the 100,000 tonnes swt threshold, they were a whopping 16% below year-ago levels. The deceleration of exports to the US is allowing a comeback for other markets.
For most of 2014 and 2015, the US was the shining star among our beef export markets, absorbing record volumes of manufacturing beef. However, as female turnoff slows, US cattle and beef prices correct and the US quota fulfilment looms, a deceleration in shipments was inevitable.
To help shed some light onto the pace of this trend since July, figure 1 shows the monthly beef exports to the US for 2014, 2015 and the 5-year average. After tracking in a 40-45,000 tonnes swt range between September 2014 and August this year, volumes declined steadily in September and October. At 22,018 tonnes swt, October’s shipments were 50% below July’s levels and 48.5% lower year-on-year.
To a large extent, we are seeing a supply and price trend in reverse from 2014. While record shipments and the spike in export prices coincided in the last quarter of 2014, this year volumes and prices have headed south since September. That said, exports remained slightly above the 5-year average in October, while the 90CL price is still firm in A$ terms, averaging A601¢/kg CIF.
As trade conditions with the US cool down and beef prices come off the boil slightly, overseas consumers that had been priced out of the market are staging a comeback. This is clearly the case for South Korea and China, where demand remains strong and reduced US competition is allowing them to step in again.
After a sluggish performance in 2014, China regained some ground this year to see imports heading back towards the highs of 2013. As of October, year-to-date shipments to the country totalled 120,304 tonnes swt, a 13.5% increase over the corresponding period in 2014. As for Korea, year-to-date beef exports have reached a record of 133,830 tonnes swt, surpassing last year’s levels by 9%.
Last but not least, Japan remains a solid and robust export market, with the country reclaiming its position as the largest destination for Aussie beef in October after spending 20 months behind the US. Year-to-date volumes are virtually unchanged from 2014 levels at the 238,149 tonnes swt.
The sharp deceleration in beef exports seen over the last three months is indeed symptomatic of a major decline in cattle turnoff during the period. Demand has cooled slightly, particularly from the US. Yet, we need to keep in mind that the US will remain a robust market in 2016 as its domestic consumption is strong and supplies relatively tight by historical standards. The strength of the US$ is also very supportive for us.
As the US steps away from the spotlight, we will have a better chance to cater for markets that missed out over the last 12 months. The underlying demand fundamentals from Asian markets, the Middle East and other emerging markets remain favourable, despite them being overshadowed by the US in recent times.
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