By Matthew Dalgleish | Source: DAWR, MLA, Steiner
The August release of beef export volumes from the Department of Agriculture and Water Resources shows a halt to the decline in trend experienced since May with total consignments during August holding steady near the 80,000 tonnes swt level.
Figure 1 highlights the 2016 seasonal pattern, which until June had been tracking very closely to the five-year average pattern before a reduction in shipments to the US and Japan over the last two months have seen monthly volumes slip to the lowest level experienced since the start of the year. The retraction in export volumes somewhat unsurprising given the reduced production experienced this season and tight supply, along with firm domestic cattle prices start to have an impact.
Indeed, the August beef trade volumes recorded at 80,601 tonnes (a mere 166 tonnes lower than the July figures) represent a 15.8% decline on the five-year average for August. Overall export figures dragged lower largely by declines to consignments to the US (32.9% below five-year averages for August) and, to a lesser extent, Japan (8.9% below the five-year average for this time of year).
Taking a look at percentage market share year on year (figure 2) we can see that the percentage of beef exports to the US have staged a reasonable decline from levels recorded during 2014 and 2015. Similarly, trade to China has also reduced from the peak experienced during the 2013 season, albeit somewhat more moderately. In contrast, consignments to South Korea have shown steady growth over the past two years and, to a lesser extent, beef export to Japan and “other countries” have shown an increase over the current season.
Key beef export prices level for shipments into Japan and South Korea appear to have stabilised this year after reasonably solid growth since the start of the decade. The 90CL frozen cow indicator of beef export prices into the US peaked during the 2015 season and the yearly average is now back under 600¢ for the first time in two years.
The potential exists for the trend in export volumes to remain below average as we head into the 2017 season as the anticipated reduction in production and tight supplies, combined with relatively high domestic prices work their way through the cattle market dynamics.
In addition, subdued/softening beef export prices and competitive global beef prices will limit how far local cattle prices can run higher into next season. Broadly speaking it is expected that the domestic cattle market is in for another solid year with regard to price action. However, we may not see it peaking as high as we did this year if beef export prices and offshore cattle market prices, particularly in the US, remain subdued.
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