THE mountain of protein building in the United States coupled with extreme volatility in trade conditions for American meat businesses has the global beef game very nervous.
The concern for Australia is multifaceted.
How much will the US push into lucrative Asian markets Australia has held dear?
At what point will an overflowing domestic US market drive beef prices right down?
Will there be long term shifts to other proteins that will be hard to reverse?
Also brewing in the background of global meat dynamics at the moment is the outbreak of African Swine Fever in China, with the potential for the world’s largest consumer of pork to need to lift meat imports hard and fast.
North American based managers for Australian beef traders report July saw the US add 17 per cent to July 2017’s exports of beef and veal.
Year-to-date the US has exported 236 million pounds more beef and veal than last year, about 15pc ahead of 2017.
South Korea, which has consistently been one of Australia’s major export destinations, is now a big purchaser of US beef and veal, with July data showing a 61pc gain on last year.
Japan sales of US beef were also up 13pc.
The fact the US has shipped to more destinations in 2018 was also a concern to Australia, analysts said.
Rabobank’s latest beef quarterly said US beef prices had held up remarkably well given higher production levels but increased supplies of total proteins and trade fallouts will be a big concern in the second half of this year.
Senior analyst animal protein Angus Gidley-Baird told Fairfax Media’s Andrew Marshall pork, poultry and beef production had increased in the US at the rate of 4 to 5pc per year for past few years and had now reached the point of market saturation.
“Thankfully, the US consumer is eating more and their per capita consumption has lifted and is expected to rise again this year,” he said.
With a large proportion of US cattle country now drought-affected, the decision tipping point had been reached in terms of whether cow calf operators offload more this year.
The worst case scenario, Mr Gidley-Baird said, was that situation combining with more cows being tipped into the Australian market if those who had managed to carry breeders through a dry winter did not see any relief come spring.
With increased US production needing to find a home, the effect of uncertain trade arrangements is exacerbated.
The trade war with China is forcing big volumes of pork back onto an already full domestic market and has stalled the momentum of US beef export growth following the re-opening of those doors last year.
The bigger worry, however, for US beef appears to be the slow progress of renewing the North American Free Trade Agreement.
Peak US body the National Cattlemen’s Beef Association said there was still enormous uncertainty surrounding trade with Canada and Mexico, two of the US’s top five export markets.
NCBA’s director of international trade and market access Kent Bacus said if the US pulled out of NAFTA, tariffs on US beef would rise to 25pc and preferential access to Canada would go.
“Mexican consumers have become loyal to US beef and we don’t want to jeopardise that,” he said.
“Another option is a skinny NAFTA that would include a new deal on automobiles. It is all still up in the air so a lot of people are nervous.
“Meanwhile, a year ago US beef was celebrating the re-opening of the China market and now we are escalating towards a full blown trade war with US beef on the retaliation list.
“The threat is very real we could be shut out of that market again.”
African swine flu
The latest on the African Swine Fever outbreaks indicate China is just the tip of the iceberg.
Analyst and meat broker Simon Quilty, Victoria, estimated an additional 125 million hogs from surrounding Asian countries could be impacted in addition to China's 433 million head - combined this equates to almost 70pc of the global swine population.
“Pork imports from clean countries or regions could become a premium and play an important role in filling the pockets of demand that could occur due to quarantining and supply disruption,” Mr Quilty reported.
Rabobanks says a lift in global pork prices could benefit beef supply chains in other regions.