Trade Global demand dynamics shift
The greatest of these forces has been the surge in meat trade to China in recent months. Global demand more broadly has also been strong, with a suite of Australia’s export markets showing positive signs.
May beef exports, at 105,000 t swt, dipped below year-ago levels for the first time in 18 months but remained historically high, with shipments earlier in the month likely impacted by the late-April extended Easter break. May lamb exports, at just under 30,000 t swt, broke fresh monthly shipment records but mutton exports, at just over 12,000 t swt, reflected the dwindling supply of available sheep ahead of winter.
With the BOM forecasting a below-average chance of median rainfall over the next three months, cattle will likely continue to flow through Australia’s slaughter floors, as feed and water availability remain key challenges.
Many key export markets have been willing buyers of Australian red meat, with strong competition for product helping to support prices despite the elevated supply. This has been further supported by an Australian dollar hovering around 70US¢, down from the 76US¢ this time last year. China has been the biggest game changer, with January-May Australian beef exports to the market up 61% year-on-year. While not yet Australia’s most valuable red meat market, China has been the largest combined beef and sheepmeat export volume destination so far in 2019, surpassing the US and Japan for the first time.
While the growth in lower quality cuts may be attributed to the spread of African Swine Fever, the trade expansion began before the disease outbreak and the increase has been evident in high and low value cuts alike. While manufacturing beef exports have increased 74% over the first five months of 2019, other major cut categories have expanded a similar degree. Grainfed beef loin exports into the market, for instance, have increased 54% year-on-year so far this year.
However, China is not the only market showing strong demand. For beef, the US has also recorded strong growth. Manufacturing beef exports to the US have expanded 14% so far this year, led by the leaner end of the market which has offset reduced demand for fatty trim. Meanwhile, chilled grassed beef primal exports to the US – a high value niche market – have increased 9% to a four-year high during the first five months of 2019.
Beef exports to Korea are up 8% so far this year, despite strong competition from US product. Meanwhile, exports to Japan are back 9% year-on-year but that is compared to a high base period (Japan tariff on imported US beef temporarily snapped back to 50% in 2018) and still above 2016 and 2017 levels.