October 10, 2022
Significant drop in Australian beef exports in September
Australia's beef exports to all markets fell sharply in September, under the accumulated impact of processing delays caused by wet weather logistics problems, persistent labour shortages and the underlying scarcity of slaughter cattle due to post-drought herd recovery.
The one-off national public holiday observing the passing of UK Queen Elizabeth also robbed September of an extra processing operations day this year.
The result was an export tally to all markets of just 70,295 tonnes, down about 12,000 tonnes or 13% on the month before, and one of the lowest monthly volumes seen all year. Volume was down almost 9,600 tonnes or 12% on September last year.
Another contributing factor was a slowdown in export to South Korea last month, after a near-record August tonnage caused by a one-off tariff opportunity provided by the South Korean government.
Beef exports to South Korea in August shot to 18,368 tonnes, up 42% on the same period a year earlier, driven by the country's earlier decision to suspend tariffs on 100,000 tonnes of imported beef. The move was part of a government effort to combat rising inflation to lower prices in staple goods, including beef.
Australia currently faces a 16% tariff on exports to South Korea, while major competitor the United States (by way of its earlier free trade agreement) pays a 10.6% tariff. The temporary removal of the tariff thus created an outsized tariff advantage for Australian exporters.
Consequently, Australian exports to South Korea in August shot up, but came back to more conventional levels last month. The frozen beef component of the 100,000 tonnes ‘quota holiday' filled quickly, while the chilled/manufacturing quota component was expected to be exhausted before the end of September.
Year-to-date, South Korea has now taken exactly 118,000 tonnes of chilled and frozen Australian beef, slightly up on the same period last year.
Calendar year to date, Australia's exports to all markets have reached 635,799 tonnes, down 4% on the same period last year. It's now looking increasingly unlikely that full-year Australian beef exports will reach 900,000 tonnes again this year – after 2021 set a three-decade low at just 887,679 tonnes.
Despite recent currency movements, price competitiveness in world markets remain a big issue for Australian beef, with volumes held in cold storage again on the rise.
Other main export destinations for Australian beef also reflected the downward trend last month.
The largest and highest value export customer, Japan, took 15,791 tonnes last month, down 6,200 tonnes or 28% on August, and 26% lower than September last year.
For the first nine months of 2022, Japan has now taken almost 165,000 tonnes of Australian beef, down 6% on the same period last year.
Apart from Australia's production challenges, there is currently an abundance of US grainfed beef finding its way onto global beef markets like Japan and South Korea – at very competitive prices, due to the major herd liquidation occurring due to US drought.
China filled second place in export volume rankings in September at 14,917 tonnes, down 11% or 1,880 tonnes on August, and 20% lower than the same period last year.
China has been particularly active in beef importation this year, with shipments from all countries in July reaching an all-time record of 270,038 tonnes – 42% higher than in July last year. Almost all of this massive growth came from South American supply, however. In August, Australia represented just 6% of China's beef imports, due to price competiveness issues.
Year to date, China has taken just over 117,000 tonnes of Australian beef – around 80% of which was in frozen form. That's up about 7% or 8,200 tonnes on the same period last year, when the country also had COVID-19 lockdowns in place for long periods, but a far cry from volumes shipped in the same period in 2019 and 2020.
Australia is increasingly being marginalised in the Chinese market due to cheaper product out of South America and greater volume being shipped out of the US.
Given the extreme high rates of beef kill in the US at present due to drought, Australian beef exports to US east and west coast ports remained low in September.
Nine-month trade to the US to September 30 reached only 94,155 tonnes, down 14,000 tonnes or 13% on last year. Given Australia's deep manufacturing beef trade connections with the US which for decades saw annual trade volume above 250,000 tonnes and often well above 300,000 tonnes, this year's figure is remarkably low.
Volume last month to the US reached only 8,588 tonnes, down 43% or 6,400 tonnes on the previous month. It was one of the smaller monthly shipments to the US this year.
In smaller and emerging export markets, the trade pattern was similar.
Indonesia took 3,281 tonnes, down 28% or 1,300 tonnes from August, and 21% behind this time last year. Trade for the past nine months has reached 29,663 tonnes, down 19% on the same period a year earlier.
The combined seven-country Middle East region accounted for 2,689 tonnes of Australian beef last month, down 20% from August, and 10% lower than September last year. Year-to-date numbers showed trade at 21,395 tonnes, down 6% on the previous year.
In the absence of any working free trade agreement with either the United Kingdom or European Union until at least next year, Australian trade into the region continues at just a trickle.
Volume into the UK market last month reached only 101 tonnes, while the total for the year has been 620 tonnes.
The broader EU since BREXIT has fared little better. Total last month was 435 tonnes, down 6% from a month earlier, while total shipments into the EU since January 1 have reached 5,883 tonnes.
- Beef Central