US/China trade war ceasefire

US/China trade war ceasefire

Markets
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The United States and China have entered into a 90-day 'ceasefire' while they try to resolve their trade war.

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ANYONE who caught the television news item on the weekend would have heard of a breakthrough ‘ceasefire’ in the trade war between the United States and China.

The two leaders (Presidents Donald Trump and Xi Jinping) met during the G20 summit at  Buenos Aires, Argentina but no details were available at the time of the announcement other than the talks went “very well”.

Since then a number of news sites have quoted from a White House statement brief details of what has been agreed so far.

In return for President Trump agreeing that on January 1,2019 he will leave tariffs on some $200 billion worth of Chinese products at 10 per cent and not raise them to 25pc as scheduled, President Xi Jinping has indicated that China will agree to purchase a not yet agreed upon but very substantial amount of agricultural, energy, industrial and other product from the US to reduce the trade imbalance between the two countries.

The truce also buys time for the two leaders to address much-publicised US grievance issues such as technology transfer, intellectual property protection, cyber theft/intrusions and the like.

A somewhat optimistic 90-day ceasefire period has been agreed and if at the end of this time satisfactory progress has not been achieved the 10pc tariffs will go up to 25pc.

Live export: economic and social impact

MECARDO, an independent strategy and marketing advisory business which specialises in agriculture, was recently engaged by LiveCorp and Meat and Livestock Australia to undertake an analysis of the Australian live cattle trade.

The prime purpose of the study was to determine the value of the industry to regional zones across the country.

Cattle Council of Australia has welcomed release of the report which confirms the economic and social imperatives of the trade and its positive impact at farm gate.

Key findings include:

  • The live cattle export trade is a vital contributor to regional economies, in particular the Northern Territory and north of Western Australia.
  • 40-57pc of the revenue value generated is retained by cattle farmers. This is particularly true for the Northern Territory and north Western Australia where the value of cattle underpins the land value itself.
  • Direct on-farm employment as a result of the trade is calculated at 2029 for the 2012-2017 period. However a 4.83 multiplier effect relevant to the sector (which encompasses farms, transport operators, fodder suppliers, livestock agencies, export companies, shipping contractors, port operators, veterinarians and financial service industries) extrapolates to a total employment average of 9799 full time equivalent positions for the same period.
  • In times of drought the live export industry is able to support domestic cattle prices when the market is saturated with stock, providing an alternative sales outlet for Australian farmers liquidating their herds.
  • The live cattle export trade sustains a raft of industry support services including veterinary, transport and agency businesses.
  • Australia’s trading partners rely on the live trade to meet their beef requirements and ensure reliable supply of product for their population.

Commenting on the findings, Cattle Council CEO Margo Andrae said the ongoing national importance of the livestock export industry was clear.

Also, the analysis was timely given drought was again putting pressure on the cattle market.

“Competition and diverse market options are always critical for producers, but during drought the way the live trade can put a floor in prices for lighter cattle and act as a relief valve in the market is absolutely crucial,” she said.

Extreme weather impacting market

WITH extreme heat, wind and little or no follow-up to the good October rain, the supply side is once again swinging more toward sell rather than hold and prices for most classes of cattle look set to lose ground before year’s end.

Bushfires are adding to the challenge particularly in Central Queensland and right now would be a good time for a general drenching or at least some storms in the right places to provide relief.

In the fat market the five-week run since late October of the best prices for the year has come to an end with the first adjustment by one major processor of 5c/kg on Wednesday last week. That was followed by a further 5c on Monday and a matching 10c/kg by a competitor on Tuesday.

At time of writing some other grids remain unchanged which puts 4-tooth ox in southern Queensland at 545-550c/kg and heavy cow at 470-475c. In Central Queensland ox rates currently sit at 540-545c and cow at 450-470c.

Further changes may occur as other processors review their rates this week and as one processor put it another adjustment may be in store next week if the numbers keep coming.

A large part of the reason behind this expectation is the strengthening of the Australian dollar, which has moved up to around 73.5c against the US currency.

In the saleyards Wagga set the tone on Monday with numbers increasing to 4300 head and a large percentage of the offering described as being in secondary condition. Cows are still coming forward in good numbers and of the 1100 offered more than half were heavyweight export types.

These and similar offerings in Victorian markets have been a significant factor in keeping kills going for some northern operators.

Rates, however, were 8-12c off with the best reaching 223c/kg and an average of just 203c for the 600-odd reported. That puts them around 400c/kg carcase weight depending on dressing percentage.

Indications are that this will flow through to Queensland markets this week with Toowoomba on Monday quoting cows (albeit a small offering) 9-12c cheaper.

MLA reported 135,142 cattle slaughtered across eastern states last week, down slightly on the 138,000 of the week before.

NSW was unchanged and Vic up by 11pc reflecting the current flow of slaughter cattle to market in the south.

Queensland, however, dropped by 5000 head to 63,226 mostly due to fewer females in the mix.

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