By Matt Dalgleish | Source: MLA, Steiner, DAWR, ACA
Regular readers of Mecardo will know that we regularly reference local prices to the 90CL grinding beef price from the USA, given the importance the US has as both a beef consuming client of Australia and a key export competitor into Japan and South Korea. This article takes a look at the recent price behaviour of two of the other key export price measures from our top two Asian beef export destinations.
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Figure 1 highlights the average monthly price pattern starting from 2010 for the three top beef export destinations for Australian product. Since January 2016 the 90CL has broadly trended sideways, spending much of the time between 560-615¢/kg. Indeed, comparing the January 2016 level to the September 2017 average shows that the 90CL is only 1% lower at 560¢.
In contrast, the Japanese grassfed fullset price has softened 13.8% over the same timeframe to sit at an average of 743¢/kg for September 2017. The South Korean cube roll has demonstrated a greater magnitude decline, falling 30.4% from its January 2016 level to average 848¢/kg in September.
The decline in the Japanese grassfed fullset price during 2016 has seen the premium spread of Japanese beef export price to the 90CL narrow from fairly extreme levels above the upper end of the 95% range boundary at 70% to 33%, and has spent much of 2017 under the average premium spread since 2010 of 39% (black dotted line) - figure 2.
Figure 3 highlights the South Korean premium spread to the 90CL and it shows a similar narrowing since 2016 to that of the Japanese spread, albeit of a greater magnitude. Moving from above the 95% range boundary at 124% to sit just below the lower end of the 70% range at a 51% premium to the 90CL and well below the average premium spread since 2010 of 71%.
Average monthly beef trade flow volumes since the start of 2017, as reported by the Department of Agriculture and Water Resources, shows that consignments to Japan are currently running 15% above the 2016 averages. In contrast, consignments to South Korea over the same time frame are running 14% below the average levels set in 2016.
This indicates that demand in Japan for Australian beef has been comparatively more robust, most likely assisted by the increased US beef tariff, keeping export prices relatively well supported in that country and suggests why the Japanese export premium to the 90CL hasn’t narrowed as much as the South Korean premium this season.
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