Japan lifts age restrictions on US beef imports

Japan's Ministry of Health, Labour and Welfare, as the responsible agency, had only just closed a public comment period and was about to start working through the submissions.

There was an expectation that a favourable outcome would soon follow but Friday's announcement by the Japanese government that the age restrictions were lifted effective immediately must represent something akin to an interstellar speed record for bureaucratic process.

That says a lot about the pressure Japan is under from the US to yield something in the way of agricultural concession in the current negotiations for a bi-lateral trade deal.

Noticeably it was US Agriculture Secretary Sonny Perdue who heralded the news last Friday.

As noted in last week's companion story in this column it was no less a figure than the Agriculture Secretary who upped the ante in the trade negotiations by personally interceding with his Japanese counterpart Takamori Yoshikawa on the sidelines of a G20 meeting a week earlier.

Perdue was reported to have pressed for Japan to make a unilateral tariff concession ahead of the trade deal but Japanese Prime Minister Shinzo Abe was thought likely to resist such a move because of looming Japanese upper house elections in July.

In giving something by way of bringing forward the lifting of a non-tariff barrier (that was going to happen anyway) Abe should now be better placed to hold his ground.

He would also be heartened by President Donald Trump's concurrent announcement on Friday of a 180-day delay in the imposition of tariffs on automobile imports and parts.

The deadline for the imposition had been May 18 so while the threat remains, the extended deadline does allow more time for Japan to play its hand to best advantage.

Those negotiations resume this Friday when US Trade Representative Robert Lighthizer returns to Japan to meet with Economic Revitalisation Minister Toshimitsu Motegi.

LAST week MLA forecast some good news for Australian cattle prices in the longer run based largely on the latest USDA World Agricultural Supply and Demand Estimates report.

Its revised forecast for US beef production in 2019 was for a 1.5 per cent year-on-year increase to 12.37 million tonnes (cwt) and for its first look at 2020, an expectation for expansion to slow to just 0.9pc YOY to 12.48mt.

The rationale for the positive effect this may have on Australian cattle prices is that the extra production that has emerged from the US over the past four years and entered the export market in competition with Australian product may soon hit high tide and even start to recede.

But the MLA article doesn't articulate just when this beneficial effect might start to come into play.

Certainly it won't be 2020 as US production is still expected to be expanding then (albeit at a diminishing rate).

Perhaps 2021?

Well, no, that's a bit hard to see also as the US herd could reasonably be expected to still be somewhere near peak of cycle with production commensurately high.

Perhaps the best that might be said is that if the US herd does move into a contraction phase the benefit from receding production might be felt in Australia somewhere out toward the mid-2020s.

Of course, there are several ways in which cyclic contraction might play out.

The herd could bobble along with less than 1pc contraction as it did between 1999 and 2005 when female percentage of kill held at just marginally above the 48pc break point between contraction and growth.

This would mean a very slow decline in production and a longer timeframe for flow-through benefit to Australia.

Or it might do a repeat of 1975-78 when female percentage of kill jumped sharply to 54pc resulting in a herd contraction of 5pc.

As we saw in Australia in 2014-15, herd liquidation of such intensity generates a massive short-term increase in beef production and that normally has a strong negative implication for cattle prices.

As the graph in the MLA article shows there is nothing fixed about the way the US herd cycles between growth and contraction.

Some flow-on benefit to Australia at some stage in the future would be nice but maybe the sanguine message is to expect the unexpected.

Early last week it seemed that while the current run of cows was building there was no indication of a tsunami and grid rates remained unchanged.

Tuesday last week saw 800 cows at Warwick and while rates came off 14-21 cents, heavy score-4s still averaged a respectable 217c/kg.

By Wednesday, however, the outlook had changed considerably.

Dalby lined up more than 2200 cows and the 21c adjustment of the day before blew out to a massive 37c drop.

There were over 800 good heavyweights and disappointingly for vendors the score-4s averaged just 199c and their score-3 companions 186c.

By Thursday processors were reviewing grids resulting in a10-20c drop on cows and 5c on ox.

Published and non-published grids for southern and central Queensland this week are now showing 4-tooth ox at 530-535c and heavy cow at 420-430c/kg.

In contrast the market in southern states is indicating a tightening in supply.

Wagga on Monday this week offered just 500 cows and rates generally held firm.

Heavy score-4s averaged 218c and the score-3s 193c.

That would suggest if southern buyers haven't already arrived, they can be expected in the northern NSW/southern Qld markets from here on.

Slaughterings last week reflected the surge in cow numbers together with solid numbers of male cattle.

MLA's eastern-states report showed a jump from 145,000 the week before to 153,569 last week making it the second highest weekly throughput so far this year.

Female proportion across Qld/NSW was 51pc.