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Tuesday, February 16, 2016

Stewing over the beef export figures

By Matt Dalgleish  |  Source: DAWR

Key points

  • Total beef exports for January 2016 are lower than figures for January 2014 and 2015. However, the numbers are still within the normal range and are above the five-year average.
  • Beef exports to Japan display a weakening trend over the past two months when compared to previous seasons figures. In contrast, Chinese and South Korean figures remain resilient.
  • Recent US beef export data displays a mixed message. Healthy numbers for December 2015 and subdued figures for January 2016, albeit still above seasonal averages for January. 

2016-02-16 Beef Stewing Fig 1

2016-02-16 Beef Stewing Fig 2

2016-02-16 Beef Stewing Fig 3

ABC Landline recently aired an interview with David Foote, CEO of Australian Country Choice, that indicated beef export levels had softened considerably over the last few months. This article aims to have a look at the most recent figures from the Department of Agriculture and Water Resources (DAWR) to see how beef exports have started the 2016 season.

Figure 1 demonstrates the fact that there has been a drop in total beef exports for the January period when compared to the previous two years’ figures. DAWR reported a figure of 58,304 tonnes swt for January 2016. While this is below the January numbers for 2015 and 2014, of 67,537 and 69,511 tonnes swt respectively, it is still slightly above the five-year average for January of 56,185 tonnes swt and within the normal range for the period.

In addition, December 2015 figures showed a rebound in export numbers after a steady decline in figures from July to November 2015. This was largely driven by an increase in exports to the US after the re-set of the quota for the 2016 season.

Figure 2 highlights the beef export figures for December 2015 according to destination. It is clear that the monthly numbers for China and South Korea were higher than for the previous year and above the five-year averages for December. While exports to the US came in marginally lower in December 2015 compared to December 2014 the numbers are still well above the average. Indeed, it was only Japan and “other countries” that posted net year on year declines for the month along with numbers being below the five year averages.

Turning to the January 2016 figures according to destination (Figure 3) we can see a marked drop in beef exports to the US when compared to January 2015. However, despite the steep fall figures still remain above the average for the period. As was the case in December 2015, South Korea and China posted net year on year monthly gains in beef exports for January 2016 and remained above the five-year averages for the period. Japan and “other countries” continued the weaker trend displayed in December 2015 with figures both under the averages and below the December 2014 numbers.

What does this mean?

While anecdotal reports from processors could paint a picture of doom and gloom for beef exports into the 2016 season the recent numbers show more of a mixed message. Local production constraints due to expected tighter supply is likely to be the primary catalyst for reduced export volumes rather than demand factors.

A key factor in the supply equation remains processor margins. Certainly, beef export price levels will have a trickle down effect through to local prices for finished cattle. Despite appearing to enjoy a comfortable run in 2014/15 processors may find it somewhat tougher into 2016. Stay tuned as next week we will take a closer look at processor margins and see if we can get a glimpse of the state of play in this side of the industry.    

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