AFTER just a slight drop in export beef tonnage in October, November has returned a strong result to virtually match the September figure at 87,850 tonnes, according to the latest update from DAWR (Department of Agriculture and Water Resources).
This brings the 11-month progressive count for 2017 to 926,815t which is just a whisker behind same period last year.
With seasonal closure approaching, it is evident that the result for the full year will now fall over the 1 million tonne mark and possibly only a couple of thousand tonnes short of last year’s 1.018mt result.
While the overall volume of trade will be very similar to last year, there are some significant differences showing up between markets.
Perhaps the most noticeable is the United States.
In 2016, Australian beef exports to the US plummeted to 240,000t from the 2015 high of 416,000t.
That looks like falling even further this year with November continuing the downward spiral that has been occurring since the August highpoint of 25,000t.
September dropped 5000t, October a further 2000t and another 4000t for November brings the monthly trade figure to just 14,700t.
At this level the US market represents just 16.7pc of Australia’s total export trade, a vast difference to the situation in 2015 when the figure stood at more than 32pc.
The difference, of course, has been brought about by rebuilding of the US herd.
Strong year-on-year gains in supply of fed and non-fed slaughter cattle have lessened the need for imports while increasing the amount of product available to trade at very competitive prices in export markets.
Respected market analyst Steiner Consulting points out that cow prices in the US are now down as much as 50pc from market peak in 2014.
Obviously there is a message in this for Australia as it moves toward herd rebuilding in 2018 and beyond.
In the meantime, the immediate issue for Australian sales desks is the reluctance of traders and end users to maintain recent FOB prices for lean beef against the background of a futures market now falling at the rate of the daily permissible limit.
In the space of just one week imported 90CL blended cow has fallen from US220c/lb to 215 with buyers for most part looking to see it drop further to under 210.
Fortunately for Australia as Steiner notes, there would appear to be a willingness in other markets notably Asia, to pay above US levels.
This may explain the gains in volume that Australia has recorded in recent months in the Chinese market.
From a 6600t low in August, trade has climbed to a year-high 11,790t in November.
This puts China on track for well over 100,000t for the full year, a good improvement on the 93,000t total recorded in 2016.
Japan is even more noteworthy in terms of volumetric growth as it looks set for a 290,000t year compared to 263,000t in 2016.
Head to head, there have been only two months this year when Australia’s export tonnage to Japan did not exceed last year.
However it is noticeable that trade has backed off from the 27-29,000t per month level seen from June to August to 23-25,000t over the last three months.
Triggering a safeguard tariff increase of 11.5pc on frozen beef may have temporarily steadied US incursion into this market and saved Australia from greater loss of share but that will only last until shipping for the new Japanese fiscal year of April 1 commences.
Similarly Korea will continue to represent a challenge in the year ahead as Australia looks set to record a 30,000t (18pc) fall in this market to around 147,000t this year.
On the plus side, November saw a return to June/September levels at 13,700t from a low of 11,300t in October.
Despite the magnitude of the task ahead, Australian exporters will be determined to generate sales revenues that will help put some black ink back on P&L statements in place of the red that has prevailed now for longer than people care to remember.
Fats cheaper, stores dearer
WITH processors reasonably placed for cattle in the final weeks of the year, rates came off by 10 cents last week.
Indicator four-tooth ox in southern Queensland is now 495c/kg and heavy cow 440.
Further change would seem unlikely and the year should end at this level as plants start closing down from the end of next week. Except for those who work through, last kills will be December 20.
This stronger-than-expected run home in the final weeks suggests there are still a few cattle in the system despite the unexpected numbers that came forward in the third quarter.
Without kill figures it is hard to know what happened in October but it seems likely some cattle would have been held back because of the wet and presumably they might now be contributing to the current run.
However a further and more significant consequence of the October rain is the bonus effect on weight gain for those cattle in the supply pipeline.
Depending on how summer unfolds, gain from this early break should bolster and possibly bring forward to some extent the 2018 autumn flush of cattle.
That could lead to over-the-hook prices coming under further downward pressure and would represent a significant hit to feeder and grass-fattener margins for cattle bought on current prices.
While this downside risk is apparent enough, it does not seem to be having much effect on store markets.
Medium yearling steers to feed are still attracting as much as 339c/kg for the better types and averaging 312 according to last week’s Dalby sale report.
But just four lines further down the page in the same report is the startling revelation that all they are worth on present indications after feeding them for 70 days is 277c at best.
Hard to see how those numbers can work.