Beef looks down barrel of more competition
Global beef production to increase but so too competition for Australian product.
MORE competition will be the name of the game for Australian beef exports in 2018 but that could present as many advantages as it does challenges.
Not only beef but global meat production is forecast to grow, so there will be intensified trade competition from other beef-producing nations along with different types of animal proteins vying strongly for beef’s space on retail shelves.
Many analysts, however, are arguing the extra supply is timely, coinciding with ongoing growth in depend fueled by everything from rising incomes in Asia to the fact increases in the relative price of beef has now plateaued.
Competitive tension among our key importers as they look to secure volumes knowing how tight cattle supply in Australia is could well balance out the downward pressure on prices due to greater global production.
Rabobank expects animal protein production increases in all major regions of the world, with the total growth once again surpassing the ten-year average.
Brazil, China and the United States will be the main drivers.
Global beef production is pegged to increase by 1.3 million tonnes in 2018.
In Australia, beef production in 2018 should see its first year-on-year increase since the high drought-induced cattle slaughter in 2014.
Rabobank’s senior animal proteins analyst Angus Gidley-Baird said a forecast three per cent growth in beef production in Australia in 2018 would put total production levels back up near the longer-term average of about 2.1 million tonnes carcass weight.
Commonwealth Bank director agri strategy Tobin Gorey said ongoing US production growth was a key one for Australia to watch.
2018 will be the fourth year in a row US beef production has expanded at a rate of four per cent per annum.
Meat and Livestock Australia reports US exports to all key markets have increased in the past financial year, with the overall value now at US$5.6 billion freight-on-board – their second largest fiscal year on record.
While domestic consumption in the US has also grown, most analysts believe the point has now been reached where demand growth is no longer keeping pace with increased supply.
That means increased product is pushed into global markets and the US clearly has its eye on Australia’s most lucrative customers, such as Korea, Japan and China.
The latest ANZ commodity report says despite Australia’s expected growth in beef production next year, the outlook for exports is will be restricted to about one per cent, due to the re-entry of the US in key markets and the pressure of the US herd rebuild on our exports there.
Chilled grassfed product, particularly to the US, is showing solid growth.
MLA’s global markets boss Michael Finucan said Australian exports in this space were growing each year and currently sitting around 50 to 60,000 tonnes a year.
Beef exporters told Fairfax Media this week they were now starting to “really move” grassfed product.
The Australian Meat Industry Council said the demand had always been there but the price and very limited supply had made the trade difficult.
More rain means more grass which means more trade.
Meanwhile, the recent surge in Chinese demand for both beef and sheep meat will be another key influencer going forward, said Matt Dalgleish, from market analyst company Mecardo.
“As our production begins to increase and prices ease gradually, it will continue to encourage Chinese appetite for our product,” he said.
The prospect of the Australian dollar slipping below US70 cents, as tipped by some forecasters, would also help bolster returns for Australian beef producers exporting to China, he said.
Rabobank predicts Chinese beef imports will increase 20pc to 800,000 tonnes in 2018.