July 4, 2012

Australia beef exports up 1% despite difficult market conditions

Barely adequate in masking the actual trading realities faced by markets and lower prices received during the final months of the past fiscal year, 2011-2012 Australian beef exports reached to 948,010 tonnes, a 1% increase on-year.

While constrained beef production in 2011-2012 prevented shipments reaching the record fiscal year volume of 973,879 tonnes set in 2006-2007, 2011-2012 was still the third highest fiscal year volume on record.

For much of the 2011-2012 fiscal year, export demand for Australian beef varied greatly from market to market and in terms of product. Shipments to Japan and Korea, Australia's first and third largest markets respectively, declined 7% and 12% on-year, while in contrast, volumes to the US (second largest export market) kicked 28% higher over the same period. Reflected in the rebound in shipments to the US, manufacturing beef became a very sought after and highly priced item throughout 2011-2012, while higher valued prime cuts continued to be very difficult to move.

While there is always a range of factors that determines demand for Australian beef in the global market, in 2011-12 the on-going global economic turmoil was a constant headwind for exporters to overcome. In almost all importing markets impacted by the on-going economic concerns, sluggish consumer demand for most products, including beef, kept buyers very hesitant in handling large inventories, along with trying to restrain prices to consumers. Added to this was the impact of the high AUD, which averaged 3.7% higher at 103.6 cents - further reducing the price competitiveness of Australian beef to most markets.

Increased competition from the US also added to the tough year for Australian exports - especially to Japan and Korea. Australian shipments to Japan for 2011-2012 totalled 325,846 tonnes, down 7% on-year and the lowest fiscal year total since 2002-2003. Very tentative economic conditions and subdued consumer demand throughout the past year in Japan drove end-users to look towards lower prices items, with frozen beef making up 60% of Australian shipments, up from 57% in the previous year and 43% in 2002-2003.

The 12% contraction in Australian beef exports to Korea for 2011-2012, to 122,783 tonnes, was largely due to a slowdown in Korean consumer demand, increased competition from US beef and higher domestic beef production.

Other markets to register declines in 2011-2012 included Indonesia (down 16% on-year) and Russia (down 35%) - although both falls were from historically high levels in 2010-2011. Import permit issues in early 2012 hindered Australian beef shipments to Indonesia in the past 12 months, totalling 37,851 tonnes, while exports to Russia fell to 46,676 tonnes, as import demand contracted and higher prices in the US attracted additional product.

However, there was also some positive news for the Australian export industry in 2011-2012, led by a rebound in both volumes and prices to the US. Largely a destination for manufacturing beef, record high US imported beef prices helped to attracted additional Australian shipments, reducing volumes to other markets, especially Russia. However, it must also be noted that the 28% on-year jump in volume to US for the past year, to 205,210 tonnes, was compared to a very low 2010-2011 shipments year.

There were also a numbers of countries across Asia which took a record volume of Australian beef in 2011-2012, including Taiwan (up 20% on-year, to 37,823 tonnes), Hong Kong (up 66%, to 9,576 tonnes), China (up 8%, to 7,736 tonnes) and Singapore (up 43%, to 11,800 tonnes). A record volume was also registered to the Middle East in 2011-12, up 7%, to 31,286 tonnes, while exports to the EU reached 13,403 tonnes - up 8% on-year.

One trend that was maintained in 2011-2012 was the diversification of Australian beef and veal exports away from the traditional "big three" of Japan, the US and Korea. For the past fiscal year, Australian beef exports to all "other markets" made up 31% of all exports - compared to 30.6% in 2010-2011 and only 7.6% in 2004-2005. Indeed, as one entity, the "other markets" took a record 294,437 tonnes for the past fiscal year - only 31,411 tonnes below Japan.