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Tuesday, October 10, 2017

Relative beef export prices.

By Matt Dalgleish  |  Source: MLA, Steiner, DAWR, ACA

Key points

  • Since 2016 the 90CL beef export price to the US has been trekking sideways within a broad 560-615¢ range.
  • In contrast, beef export prices to Japan and South Korea have been in decline - falling 13.8% and 30.4%, respectively.
  • Compared to the 2016 season, higher demand for Australian beef in Japan during 2017 appears to have provided some support to Japanese beef export prices.

2017-10-10 Cattle  Fig 1

2017-10-10 Cattle  Fig 21

2017-10-10 Cattle  Fig 3

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.

To find out more about the 90CL – click here.

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%.  

What does this mean?

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.  

Mecardo information is provided to assist in your marketing decisions. It contains a range of data and views on the current market. It is not intended to constitute advice for a specific purpose. Before taking any action in relation to information contained within this report, you should seek advice from a qualified professional. The information is obtained from a variety of sources and neither Mecardo nor Ag Concepts Advisory will be held liable for any loss or damage whatsoever that may arise from the use of information or for any error or mis-statement contained in this report. 


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