Department of Agriculture and Water Resources figures for 2018 are now in and confirm the year by far as the biggest for beef exports since the drought-liquidation years of 2014-15.
1.124 million tonnes were shipped, an increase of 109,000t or 10.8pc on 2017.
Growth in chilled beef product accounted for 22,000t leaving frozen as the biggest part of the increased tonnage at 87,000t.
From the supply side, continuation of very high feedlot inventories has played its part in the availability of high-quality product for the chilled segment but the huge spike in frozen is undoubtedly due to a relapse back into fully-blown liquidation of female cattle.
Unfortunately there is a two-month lag in Australian Bureau of Statistics slaughter data and at time of writing, October is the latest to hand which brings the 2018 year-to-date proportion of females to 50.9pc.
That compares with 50.6pc for 2014.
November figures are due any time now but are expected to show only a modest tapering of female slaughter numbers.
The figures are also expected to confirm an overall reduction in the number of male cattle in 2018 compared to the year before.
Processors have been anticipating supply issues with male cattle for some time and it looks as though the diminished state of the herd and accelerated push through of steers by lot feeding may finally be starting to bite.
Unfortunately agricultural census occurs only every five years and the last was in 2016 which put the herd at 26.8 million head.
Perhaps conveniently for analysts, that mid-year census figure corresponds fairly neatly with the end of a prolonged liquidation phase and thus should represent a reliable low-point statistic on which to base forward herd projections.
That phase began in 2013 with the failure of the summer wet and ended (but not for everyone) with the wet winter of 2016.
It was the latter part of 2016 that pulled the percentage of females in the kill for that year down to 47 from 49.4 in 2015.
In 2017 rain came by way of storms and cyclonic influence.
On balance the benefit was widespread enough to cause the female percentage to fall to 45.5 reflecting some tentative signs of a start toward rebuilding.
MLA in their estimate thought the impetus sufficient to boost herd numbers back up to almost 28m by mid-2017, a 4.2pc jump in just 12 months.
To some however that seems something of a stretch considering peak herd was estimated at 29.3m head after three years of intensive rebuilding where female percentage was down in the 43 range for two of those years in succession.
MLA’s current mid-year estimate of herd size for 2018 is 27.4m head but there is an alternate view that the herd was unlikely to have reached the 2017 projection and on the strength of the liquidation seen throughout most of 2018 has now descended below the 2016 census figure.
If that is the case it will add to processor concern about the supply situation in the years ahead.
Asian markets dominant
AUSTRALIA’S three vitally important Asian beef markets dominated the 2018 trading year with Japan returning to a volume not seen since 2011, Korea continuing to bump up against the trade volume barrier (safeguard) inadvertently set in KAFTA (Korea Australia Free Trade Agreement) and China establishing a new record for imported Australian beef.
For Japan, the 315,780t shipped in 2018 takes us back to the sort of volumes the market had developed to in more ‘normal’ times post the 1970s crash and before the impact of BSE (Bovine Spongiform Encephalopathy).
Under that scenario volume in 2001 was 319,000t.
A year later imports from Australia had plummeted to 236,000t as a consequence of plunging Japanese consumer confidence following the BSE outbreak there.
Another year later as confidence was returning, BSE hit the US and the ban imposed by Japan on US beef resulted in a ‘golden era’ for Australia of some eight years when export volume was consistently in the high 300’s and reached a top of 405,000t.
The market conditionally reopened to the US in 2006 but it wasn’t until cattle age barriers were relaxed in 2012 that the US was effectively able to get quantity back into Japan.
In 2011 Australia sent 342,000t to Japan and by 2013 that had dropped to 288,000t.
It remained under 300,000t until last year but could have dropped further if not for the tariff advantage bestowed on Australia by its FTA with Japan.
Hopefully Australia’s new-found success will continue despite the impending likelihood of a US/Japan trade agreement of equivalence to Australia’s for beef.
No immediate fix for Korean safeguard
AS commented upon variously in this column and elsewhere, the beef safeguard established as part of KAFTA has been triggered each year since the agreement came into effect with trade-limiting consequence of snapback increase in tariff.
In 2018, 170,273t was shipped to Korea from Australia.
Safeguard in 2018 was 167,327t and was triggered on October 11.
Prior to Christmas I contacted DAWR and received advice that the Australian Government is in continuous contact with the Korean Government over the issue of the beef safeguard.
In August the matter was raised at the KAFTA Committee on Trade Goods and in December the Australian Ambassador James Choi met with the Korean Minister for Agriculture, Food and Rural Affairs Gae-ho Lee for further discussion.
The problem however is that there is no formal mechanism within KAFTA to review the agreement.
That means Australia has to accept that Korea is entitled to apply the safeguard as negotiated in KAFTA however Korea is being actively encouraged to apply the safeguard only when Australian exports are likely to cause serious harm to their local industry rather than automatically applying the safeguard when threshold is met.
There are nine years to run under KAFTA before tariff and safeguard reduce to zero.