Coronavirus unsettling the beef market
Angus Gidley-Baird, Queensland Country Life (Australia)
10 Feb 2020
The coronavirus outbreak in China is having a serious impact on global trade and economies.
While travel and trade restrictions are garnering attention, from a beef point of view we need to keep an eye on the Chinese consumer.
At the end of the day, it is their willingness and ability to purchase beef that determines the impact on the Australian cattle market.
Wuhan city, where the outbreak occurred, is under lockdown and Chinese consumers in other provinces have been encouraged to avoid public spaces to lower the probability of infection.
This creates an immediate impact on food sales. But retail sales of daily necessities are relatively resilient to the impact of a virus outbreak.
People still need to eat and consumers will continue to stock daily staples like vegetables, meat (pork, poultry and seafood which are more commonly consumed at home) and noodles.
On the other hand, the food service industry is heavily impacted as consumers will choose to protect themselves by not dining out or travelling.
This presents a real challenge for beef-exporting countries like Australia, as the majority of beef sold in China goes through the food service industry.
Compounding this problem is the logistics of a relatively full supply chain.
Strong buying activity from China late last year filled freezers - with around 90 per cent of Australian beef sent to China being frozen.
With the coronavirus outbreak occurring just before Luna New Year, celebrations were cancelled and fewer people dined out.
Now, even with people returning to work on February 10, there remains the challenge of selling this large volume of beef into a potentially softer market.
Reports are starting to come through that these full supply chains are beginning to impact Australian exporters as they are being told to hold, or slow down, orders.
Looking beyond the logistical issue, what could be the impact of coronavirus on Chinese beef demand? ...