January 15, 2015


JAEPA begins: Japan-Australia beef trade with lesser tariffs


On January 15, 2015, the Japan-Australia Economic Partnership Agreement (JAEPA) comes into force, granting Australian exporters up to 50% in tariff reductions for shipments to Japan.


The deal is good news for Aussie beef producers, said the Cattle Council of Australia. In fact, JAEPA had further expanded Canberra's trade engagements with North Asia following major agreements with China (China-Australia Free Trade Agreement or ChAFTA) and South Korea (Korea-Australia Free Trade Agreement).


Backed by promises of market access and duty-free privileges upon the full realisation of JAPEA, Australia propels ahead of its competitors, including the US. Beef exporters can look forward to the slashing of a hefty 38.5 levy which will be trimmed to half in the next 15 years.


"Japan continues to be an integral market for the Australian beef industry and Cattle Council sees opportunities to grow Japanese demand for Australian beef through the implementation of JAEPA," commented Howard Smith, Cattle Council's president.


Tailing the US, Japan was the number two importer of Aussie beef with 293,778 tonnes recorded in 2014.


Smith also noted that Australia's annual beef output could rise to 7% as producers stand to enjoy better farm-gate prices.


"…JAEPA paves the way for greater trade reform with Japan via the Trans-Pacific Partnership and Regional Comprehensive Economic Partnership negotiations," he added.


Relief from drought Down Under


With JAEPA about to start in a few days' time, the tides seem to be turning for the Australian cattle industry as droughts, which had afflicted the country for long periods, waned at the moment due to heavy rainfall hitting land from December last year.


With that respite from terrible dry spells, Mother Nature is now on the side of the local cattle sector; the cooling weather had help pushed beef cattle prices to their highest in decades, according to an ABC Rural report.


As of January 12, cattle prices in eastern Australia had risen to a US$0.25-0.33/kg range compared to sales at the end of 2014.


A question of sufficient supply


On the other hand, while the latest trade deal may likely boost Tokyo's intake of Aussie beef, Australia is still contending with tight cattle supplies due to a combination of the harsh weather conditions in 2014, which escalated cattle slaughters, and rising international demand, mainly from the US.


Slaughtering, according to Rabobank, would have reached eight million head in 2014 as the country faced an uphill tasks of fulfilling import orders.
There's also the Indonesia to attend to. The country worries that its cattle shipments from Down Under will eventually be affected, given the recent trade agreement between Australia and China.

During 2014, Australian beef and veal exports reached a record high of over 1.287 million tonnes, or 17% higher than the previous record set in 2013 of just less than 1.1 million tonnes.


For now, this month's rain may help to deescalate any potential occurrence of drought-induced slaughtering and loosen pressure on supplies.


Unfortunately, not all regions in Australia had received satisfying levels of rainfall, specifically Queensland, the largest beef-producing state in the country and one of hardest-hit.


Still, amidst uncertainties, cattle producers there could benefit from the recent rise in prices that have been influenced by the current weather condition.