Who is driving the global beef bus?

Increased beef export volumes to China: what does it mean for our global markets?


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Increased volumes of beef are going to China. What does this mean for the global markets?

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OPINION: The release of export figures at the beginning of the year saw a lot of commentary around the increased volumes going to China. Does this increased volume mean we are looking at a new driver in global beef markets?

In 2018, with slaughter numbers up 10 per cent and beef production up seven per cent, we saw exports rise. Total exports increased 11 per cent to 1.12 million tonnes. While the actual export volume increase was not a surprise, the distribution of exports was something you could be forgiven for not expecting. The big news was about the growth in volumes that went to China – up 48pc to 162,682 tonnes. We also saw increases in volumes to Japan and South Korea - two of our four major markets. This meant that in 2018, we sent 58pc of our total exports to the markets of Japan, South Korea and China – the equal biggest percentage to these markets in over 30 years. Japan, South Korea and China have all grown before. The interesting part is while these markets grew, we saw exports to the US decline by one per cent in 2018. In a year when we slaughtered 23pc more female cattle in Australia, our lean trimmings production must have represented a higher proportion of total production. The reasonable assumption would be that we would have seen a rise in exports to the US – traditionally our major lean trimmings market.

GROWING MARKET: Export figures released earlier this year have shown increased volumes of beef going to China in 2018, up by 48 per cent.

GROWING MARKET: Export figures released earlier this year have shown increased volumes of beef going to China in 2018, up by 48 per cent.

Sure, the US is growing their beef production with a higher cow kill. In 2018, they slaughtered one of the highest numbers of cows in the last five years – meaning they are producing more of their own domestic lean trimmings and needing less of ours. This was reflected by the US imported 90CL price dropping about 4pc last year, but is that the only reason?

Comparing the volume of manufacturing beef (including trimmings) exported to Japan, South Korea and China over the last five years, with that exported to the US, reveals some interesting trends. Volumes to the US fluctuate greatly, coinciding with high or low demand volumes in the US. For example, exports to the US were low in 2013 when they were producing a lot of their own beef and high in 2015, when they had a shortage. On the other hand, volumes to the Asian countries has been steadily increasing.

China and South Korean manufacturing beef imports have jumped around a little, although they have been generally increasing. Japan has been the more consistent player and shown good growth – CAGR of 10pc over the last five years. Interestingly, same store sales for McDonalds in Japan increased 6.9pc in 2018.

In 2018, Australia exported 169,886 tonnes swt of manufacturing beef to the three Asian countries combined and 140,320 tonnes swt to the US. Does this mean we need to look to those Asian countries for setting the baseline price for the Australian cattle industry – much like we have looked to the US imported 90cl price in recent years? Time will tell, but one thing to bear in mind is hamburgers are more important to the US consumer than the Asian consumer.

  •  Angus Gidley-Baird is a senior analyst with Rabobank
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