By Matt Dalgleish | Source: MLA, ABS, ACA
Over the last few months we have seen the fallout of the Brazilian beef scandal, with bans from several countries of varying lengths imposed upon the Brazilian trade, and ongoing commentary on the proposed ban of slaughter cattle sales by the Indian government. Has any of this potential instability in the global supply chain for beef product had any discernible impact on the Australian live cattle trade?
In terms of percentage of market share, the proportion of the live cattle trade from Australia to the top two destinations, Indonesia and Vietnam, has grown from 2016 to 2017. Indeed, as highlighted in figure 1, live cattle trade to Indonesia consists of 58% of the total flows this season compared to 38% in 2016. Meanwhile, the increase in Vietnams market share has gone from 9% to 23%. In contrast, the live cattle flow to China has flatlined since 2012 despite anecdotal reports that the trade is anticipated to grow significantly in the next few years.
Although the percentage of trade to Indonesia and Vietnam has increased over the last year, in terms of actual volume of trade, the 2017 season has been characterised by lower consignments due to local supply constraints within Australia, relatively high prices and the competitive threats within Indonesia and Vietnam posed by Indian buffalo meat (IBM). Figure 2 demonstrates the subdued live cattle trade volumes experienced this year with the current seasonal pattern trending along the lower band of the normal seasonal range, spending much of the year under the patterns set by the previous two seasons and below the longer-term average trend. Indeed, the average monthly flows for the first half of the year are 18% less than the average monthly volumes recorded for the same time frame over the last five years.
Clearly, there has been no noticeable lift in live cattle trade volumes from Australia in recent times despite the negative press surrounding the Brazilian beef scandal and the uncertainty around the supply of IBM into Indonesia and Vietnam. Figure 3 outlines the monthly trade volumes of live cattle from Australia to Indonesia and it shows that since the news of a proposed ban on the sale of cattle for slaughter in India on May 23rd there has actually been a drop in the number of live cattle from Australia to Indonesia during the May to June period. Although, as the five-year average pattern shows it is not uncommon to see a decline in live cattle flows from Australia to Indonesia during the seasonal tightening of supply and higher prices that usually occur over the Australian Winter period.
After the Indian cattle slaughter ban was announced in May the government was forced into a partial backdown on the back of a Supreme Court ruling in June that placed a temporary halt on the ban. Recent comments from the Indian government have alluded that changes will be made to the original ban that may exempt buffalo from the slaughter ban, providing a lifeline for the Indian buffalo meat trade.
These developments out of India appear positive for the continuation of the Indian trade into Indonesia and Vietnam. This fact, combined with lower domestic cattle prices being offset by a higher A$, may mean that further progress in increased trade volumes to Indonesia and Vietnam will be a slow grind for the Australian producer this season.
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