Know your enemy
Meat & Livestock Australia (MLA) recently analysed the US market and how fluctuating herd numbers are affecting Australian cattle prices. Using the USDA World Agricultural Supply and Demand Estimates report, it found that beef production growth is expected to slow in 2020 and that the US beef market has come under pressure due to weaker sales both domestically and abroad and for the beef cow herd to peak sooner than expected and then contract.
MLA said that this will be good for Australian cattle prices but also mentioned the impact of African Swine Fever. Its proliferation in China has meant that more consumers are switching from pork to beef, however the US-China tariff situation needs to be resolved before the former can benefit properly from that.
US beef exports dip
According to the latest US Meat Export Federation (USMEF) figures, US beef exports dropped 3% year-on-year in volume terms and 0.8% in value terms. The tariff situation between the US and Japan was one of the main reasons for the dip however now Japan has given access to all cattle, the numbers may be very different next quarter, especially as the USDA believes this additional access could be worth up to US$200m in extra revenue.
The drop in exports to Japan was offset by a 14% volume growth in exports to Mexico, a 3% volume increase to Taiwan and a 15% volume rise to Central America. The USMEF report also highlighted the potential for the Chinese market but noted that while volumes rose 4% year-on-year in the quarter, value sales plummeted 17% due to “China’s restrictive import requirements and retaliatory duties pushing the tariff rate to 37%”. The report noted that Australian beef is only subject to a 6% tariff rate, and that its grain-fed beef exports to China rose a mammoth 77% volume year-on-year during the first quarter of 2019, however MLA reports a lower increase of 67%, although that’s still nothing to be sneezed at.
While Australia may be in the driving seat, will it be in a position to take advantage? Some parts of the country have experienced what are being described as the largest herd drops in decades thanks to a combination of drought and flooding. In its industry projections, MLA predicts that although the weather conditions have improved somewhat, “even if there is a consistent string of reasonable seasons, it is expected to take a number of years before the national herd is back to its longer-term average of 28 million head”, and it expects exports to shift closer to 2016 and 2017 levels due to tightening supplies.