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Tuesday, February 13, 2018

Pfft, PAFTA schmafter!

By Matt Dalgleish  |  Source: DAWR, ACA

Key points

  • A good lift was recorded in January beef trade flows with an increase of nearly 20% on last season’s January consignments.
  • All five top destinations for Aussie beef recorded an increase on their previous January figures.
  • Asian centres remain the key for future beef export growth prospects.


2018-02-13 Cattle Fig 1

2018-02-13 Cattle Fig 21

2018-02-13 Cattle Fig 3

On Monday Australia and Peru formalised a free trade agreement (PAFTA) putting our beef producers, along with other agricultural commodity exporters, in a prime position to expand trade flows into South America. While this is a good result and broadens our beef export sector its still the Asian region that is our most important customer for beef.

Recent data release from the Department of Agriculture and Water Resources (DAWR) demonstrates a solid start to the season for Aussie beef exports, with a 19.7% lift in flows compared to January 2017 – figure 1. This places the January flow on par for the normal seasonal January level according to the five-year averages at just over 60,000 tonnes.

A breakdown of the top destinations for Australian beef exports shows that year on year growth for January was reported for all of the top five regions, although US numbers are yet to break back above five-year average levels – figure 2. However, some impressive January gains were recorded by Japan and China to place them 12% and 36% above their five-year average January levels, respectively.

Bearing in mind the huge volumes soaked up by the US during the Australian herd turnoff during the 2013-2015 period it would be fair to say that the five-year averages for the US are still a bit overstated, in terms of what could be considered normal seasonal flows. Indeed, the five- year January average excluding the uncharacteristic large flows experienced during 2014/15 sits at 11,615 tonnes, so the current January figure is around 9% higher than that at 12,734 tonnes. 

South Korean January beef consignments are showing respectable growth from the January average levels, with a 7% lift to see 9,512 tonnes shipped, while Indonesian flows are slightly more modest, recording a January figure of 2,847 tonnes – 6% above the five-year average for January.

What does this mean?

For a nation like Australia, with relatively low population levels by global standards and surplus, high quality agricultural products to trade, free trade agreements are a vital part of our success story. With that in mind, the recent Peruvian – Australian is something to applaud (so the headline was a bit tongue in cheek). But let’s not forget the prime focus for the beef export sector remains the Asian region.

As figure 3 demonstrates the proportion of flows of beef exports during the 2017 season is significantly weighted towards the neighbours to our north. It is where the real growth prospects are centred, both in terms of population and burgeoning middle-class wealth, with or without a PAFTA.

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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