September 4, 2020
Prices of cattle remains strong in Australia
Despite global COVID-19 disruptions and slowing economic conditions, cattle prices in Australia remain very strong.
Australia expected prices to drift slightly lower, as COVID-19 continues to weigh on global demand. However, limited domestic cattle supplies will minimise downside movement.
National cattle slaughter – at 612,000 head for the month of June – was down 14% year-on-year. Year-to-date national slaughter (for 1H 2020) was down 7% on the same period last year, while beef production was 5%.
Rabobank''s Q3 2020 Global Beef Quarterly report said that this poses a challenge to Ireland''s position as the major beef supplier to the United Kingdom, offering potential opportunities for alternative exporters including Australia.
Ireland is currently the dominant supplier of beef to the United Kingdom, the report said, representing 70% of total UK beef imports in 2019. But the UK is also pursuing new trade deals with countries outside the European Union, including major beef exporters such as Australia, New Zealand and the United States.
According to Angus Gidley-Baird, Rabobank senior animal protein analyst, the UK represents a big, high-value beef export market. "Once outside the European bloc, we expect it to become the fifth or sixth largest beef-importing country in the world," he said.
"The new trade deals under negotiation could challenge Ireland''s position in UK beef imports if the deals open the possibility of broader low or no-tariff access to the UK market for these other beef exporters."
The current limited availability of stock meant there would likely be minimal decline in slaughter numbers as a result of the 33% reduction in capacity of abattoirs in Vicotoria, Australia, due to Stage 4 lockdown requirements, the report said.
Reflecting the lower production volumes, Australian beef exports dropped 23% in July to 88,785 tonnes swt). Big reductions were seen in the markets of Japan (down 24%), South Korea (down 14%) and China (down 56%). Export volumes to China had also been impacted by the suspension of Chinese beef export to four Australian plants in May and the triggering of safeguard tariff measures.
The appreciation of the Australian dollar in recent weeks was also compounding the higher prices and challenging the competitiveness of Australian beef, the report said.
However, the newly-released report said trade negotiations alone will not determine which countries will ultimately supply the UK beef market in the future, with consumer preferences (for locally-sourced product) and non-tariff barriers - such as entrenched existing market relationships between food retailers and processors and purchasing standards - playing a significant role. "And these clearly do work in favour of current Irish suppliers," Gidley-Baird said.
- Food & Beverage