Dry conditions across eastern Australia have been extremely tough. Many have been feeding stock or forced to sell more cattle than usual.
The year-to-date (May 2018) national slaughter is up 11 per cent, with cow and heifer slaughter up 21pc for the same period. Yet cattle prices have remained firm. With constrained domestic consumption, part of the strength in prices is due to what is happening in our export markets.
Production and exports are on track to repeat a similar performance to that seen in 2013. Australian production is up 10pc for the year-to-date (May) and exports have increased 13pc for the year-to-date (June). Interestingly, while the proportional increases are similar, the volumes are different. Production for the first five months of 2018 (at 938,064 tonnes) is lower than 2013 (945,156t), however exports for the first six months of 2018 (at 535,734t) are higher than 2013 levels (499,750t).
This may be a combination of lower domestic consumption, following the rise in domestic retail beef prices which have not yet declined and stronger export markets, with more willing buyers given domestic cattle prices have fallen from record highs. However, unlike in 2013 and 2014, when export volumes started increasing and the US accommodated the large increase in production, this time other markets are playing a bigger role.
This is important given the current position of the US beef complex and the volume of beef in their system. US beef cow inventory is high and there are high numbers of beef cows in the national slaughter which would have an impact on their demand for imported lean trimmings – which will be discussed in more detail in next month’s column.
Australia’s four major export markets took more product in the first six months of 2018 compared to 2013. However, compared to 2017 exports, the US are only up 1pc year-to-date (June), while on the other hand exports to China, Japan and South Korea are up 46, 11 and 11pc, respectively. What’s more interesting in the growth in these other markets is that a portion of it would be associated with an increase in lean trimmings trade, given the increased slaughter of Australian cows.
The increased presence of lean trimmings in these markets is also illustrated by the ‘per unit’ export value differences. Over the past five years, the ‘per unit’ export values for the four major export markets have tracked pretty closely together. However in the six months to April 2018, the average US ‘per unit’ export value (at $9.46/kg) has been 33pc higher than the average of the other three major markets – an indication that there are more, higher value cuts going to the US than other markets.
This is a positive reminder – that while the US market remains important for our lean trimmings trade at the right price, Australia still has the ability to compete and market lower value cuts to other major beef consumers in the world.
Source:www.queenslandcountrylife.com.au
