Beef Export Trends: Navigating Challenges in the Australian Market

Australia’s beef export figures for April are nearly reaching record highs, which might lead many to believe that the market for Australian beef and cattle is thriving. However, troubling indicators suggest we may be on the brink of a significant reset.

Impact of Tariffs on Beef Exports

Notably, the beef exported in April was exempt from the recent tariffs. Any beef arriving in the U.S. with a bill of lading dated before April 10 will similarly be tariff-free. Thus, most beef arriving in the U.S. for May likely comes from contracts written prior to the tariff announcement on April 2.

Typically, beef contracts are drafted 4-6 weeks prior to shipment, indicating that much of the beef headed for the U.S. is fulfilling obligations made before the tariff was placed. However, reports indicate a slowdown in new business entering the U.S., raising concerns that the market may face an impending reset.

Market Signals from the U.S.

Tyson Foods Revenue Decline

Recent data from Tyson Foods reveals lower-than-expected quarterly sales, attributing this downturn to weaker demand for beef. The company described the current U.S. market conditions as “the most challenging” they have encountered, with consumers increasingly favoring more affordable meats like chicken. This trend is further illustrated by the USDA Choice grade beef cutout value, which has seen fluctuations.

Escalating U.S.-China Trade War

Initially, our analysis of the impact of the 10% tariff suggested that while trade flows might shift, prices for Australian cattle and beef would remain relatively stable due to exporters passing the tariff costs onto U.S. importers. Fortunately, underlying market fundamentals in the beef industry appeared strong enough to weather short-term disruptions.

However, since then, the trade war between the U.S. and China has intensified, creating fears of broader implications. The main concern revolves around secondary effects such as decreased demand and rising prices, particularly as trade between the two largest economies nears a standstill.

As inventories in the U.S. dwindle and those in China continue to build, underlying long-term issues are becoming apparent. The Port of Los Angeles, critical to U.S. trade, has projected a 35% decrease in cargo throughput for May, primarily due to a drop in Chinese shipments. Thus, while cattle and beef prices may appear higher in the U.S., the overall market health is in question.

Local Cattle Markets Overview

Despite these obstacles, local cattle markets have remained somewhat insulated, often appearing blissfully unaware of upcoming challenges.

Queensland

Queensland has seen substantial cattle yardings at Roma and Dalby, with strong competition driving prices. Cows are selling for around $3/kg liveweight, while bullocks are fetching between $3.50 and $3.60/kg. Notably, even HGP-treated bullocks are achieving similar prices, with feeders reaching up to $3.90/kg.

New South Wales

The trends in New South Wales mirror those in Queensland, where Elders agents have been surprised by the continued flow of cows despite limited feed in northern areas. Cow values have dropped by 20-30c/kg, yet demand remains solid, particularly for heavier cattle.

Riverina/Victoria

In the NSW Riverina and Victoria regions, expectations of large yardings continue. While there is abundant cattle, weightier livestock are selling well, but lighter cattle are increasingly harder to move. Prices for carcase weight can reach up to $8/kg or more for prime cattle.

South Australia/Central Australia

In South Australia, markets reflect similar sentiments, with prices for high-quality livestock holding strong. Recent yardings have included a mix of prime and feeder cattle, with prices for Certified Organic steers reaching up to $4.38/kg liveweight.

Western Australia

Western Australia has experienced a slowdown in recent weeks, with a noticeable decline in overall cattle quality. Notably, lighter cattle are currently dominating the market, with prices remaining stable despite increased demand from graziers.

Conclusion

The Australian beef market is grappling with multifaceted challenges, ranging from tariff impacts to international trade tensions. While local markets show resilience, the longer-term effects of these external factors remain a concern for producers and stakeholders.

Richard Koch is Elders’ Business Intelligence Analyst