In this file:
· Domestic beef market risks getting swamped, as export volumes decline
· Cattle price forecast revised down in ABARES Sept quarter outlook
Domestic beef market risks getting swamped, as export volumes decline
Jon Condon, BEEF Central (Australia)
September 15, 2020
AS Australia’s beef export volumes continue to retract sharply, there’s an emerging risk of the domestic beef market becoming swamped by product being diverted out of the international trade – even at a time when slaughter volumes are historically low for this time of year.
The Australian domestic market has become something of a ‘safe-haven’ for red meat processors this year, as export volumes continue to slide dramatically. August volumes to all export markets were down 27pc, year-on-year, while the previous month showed a similar trend, back 23pc on July trade last year.
Countering that, of course, has been equally substantial declines in beef production. Recent eastern states kills have struggled to remain above 100,000 head, about 30pc below this time last year. That’s come as a result of:
· 18 months of sustained drought causing herd liquidation, and lower availability of slaughter-ready cattle, and
· Processing plant closures caused either by COVID control measures, or general shortage of slaughter cattle and lack of profitability in an increasingly competitive export market landscape.
Strongest market in the world
What’s clearly evident, however, is that the domestic beef market has been impacted far less than the export trade this year.
“It is our strongest market in the world at the moment, particularly for certain items,” analyst Simon Quilty told a recent webinar.
Illustrating this, New Zealand beef has over the past month or so been imported into Australia – “simply because of how strong the Australian domestic market has been,” Mr Quilty said. “It’s been arriving in volumes that we haven’t seen in this country for ten years.”
New Zealand is one of only three countries, including Vanuatu and Japan, currently eligible to export beef to Australia.
Traders told Beef Central that while volumes are quite modest, most of the recently-arrived NZ product was made up of cheaper items including frozen trim, knuckles and rounds.
In contrast with exports, the domestic beef market appears to have declined very little in volume, if at all, compared with pre-COVID levels.
Food service utilisation remains somewhat behind pre-COVID volume, but the consistent message from retailers – ranging from national supermarket chains down to small independent butcheries – is that their beef turnover remains well above pre-COVID levels, despite rising prices since March.
One large Sydney retail chain recently told Beef Central that its turnover was still 10-15pc above numbers written this time last year.
A large multi-site beef processor told Beef Central this morning that between 50 and 60 percent of his company’s weekly production was currently staying on-shore. That’s a startling figure, in comparison with typical domestic share around 28-30 percent.
Another reason why more product is being pushed back onto the domestic market is that it avoids the impact of currency in the transaction. Since the start of June, the A$ has risen US6c, or about 9pc against the US$. That’s made Australian exports relatively uncompetitive in export markets which mostly trade in US dollars, helping push more product back into domestic cold stores.
Over-supply prospect looms ...
Cattle price forecast revised down in ABARES Sept quarter outlook
Beef Central (Australia)
September 15, 2020
AFTER forecasting a significant uplift in cattle prices three months ago ABARES has wound back its forecast, due largely to ongoing COVID-19 impacts on global demand.
In its last Agricultural Commodities quarterly outlook report issued on June 16 ABARES predicted the average saleyard price of cattle would lift by four percent to 556c/kg, compared to an average of 518c in 2019-20.
However in its new quarterly outlook issued this morning, the forecast has been pulled back to an average price in 2020-21 of 513c/kg.
The main factors that have changed in the past three months have been a continued deepening of the global COVID-19 pandemic, and its associated impacts on demand for beef in key export markets, and a more favourable production outlook, boosted by the Bureau’s recently released positive spring rainfall forecast.
ABARES’ September quarter outlook says the national herd is yet to enter a restocking phase, based on data to June, despite improvements in pasture availability.
“After two years of drought many farmers are likely to be weighing the desire to rebuild their herds against the need to manage cash flow and debt,” the report states...
more, including charts , link to full report