AUSTRALIA, North Sydney. Beef trim accounts for a significant portion of a carcase and manufacturing beef about one third of Australian exports. As such, global manufacturing beef prices underpin the value of a large part or the vast majority of each animal. Cyclical and structural changes are underfoot that may see the drivers of the global manufacturing beef market shift in coming years.
Australia is the primary source of frozen boneless beef imports (accounting for 44% of overall volume over the last decade), followed by New Zealand (38%) and Nicaragua (7%) and Uruguay (5%).
Cow and bull beef production has been rising in the US over the last three years – with elevated dairy cow slaughter fuelling growth of late – and is expected to continue on that path over the next few. As such, US appetite for imported lean grinding beef may be subdued, reflective of the dynamics witnessed amidst the previous US herd liquidation in 2011.
So if US lean imported beef requirements are declining then, why are imported Australian trim prices to the US at a four-year high? It is also closely linked to rising demand from Asia competing with a strong US consumer market.
ASF is adding fuel to Chinese demand, but this growth also reflects a maturing of the market and strong consumer demand from a fast emerging affluent consumer class. Australian manufacturing exports to China have increased 91% year-on-year in the first nine months of 2019, while hindquarter primal exports have expanded 86% over the same period. Meanwhile, Chinese beef imports from South America surged in the first seven months of 2019.
A severe economic slowdown in Asian markets could subdue this strong demand growth. However, consumer markets in Asia have so far proven resilient to ongoing trade tensions and future medium-to-long term demand growth is projected to remain positive across the region as the middle-class populations swell.
Many fast food chains feature fresh-never-frozen beef in their range of quarter pounders. The entirety of Australian manufacturing exports to the US are frozen. While the fresh-never-frozen shift threatens the trim trade with Australia, frozen beef still remains critical to the vast majority of US burger manufacturing. The other major shift in the US burger market has been the arrival of plant-based alternatives on menus.
These plant-based burger alternatives are hitting the market at an affordable price point but are yet to win wide-spread approval by customers or businesses to have a noticeable impact on beef demand. Although growth is strong, plant-based burgers of all varieties are estimated to still only represent a tiny portion of the food service burger market by value and they remain very much a niche product in the broader protein mix.
The other threat comes from cell-cultured meat however the price of these product remains well-above commercial viability. In addition, consumer’s still need to come to grips and accept these lab-grown products and they are yet to pass regulatory approval. Cell-cultured meat may compete just as much with their plant-based counterparts than real beef and have many challenges to overcome.