Audio: Finally a Slowdown in Australia's Beef Production, Exports

At the beginning of this year, Australian beef production and exports were expected to drop well below 2014 levels as the industry began to rebuild its breeding herd after more than two years of drought-induced liquidation. But these reductions did not materialize in the first half of the year, as disappointing rainfall kept Australia’s slaughter levels on a record pace. As a result, exports continued to soar, further buoyed by a weakening Australian dollar.

A slowdown finally began to surface in July, though exports were still steady with last year’s large volume at 121,568 metric tons (mt). In August, Australia’s exports dipped below year-ago levels for only the second time since 2013, with volume slowing 5 percent from a year ago to 106,010 mt.

U.S. Meat Export Federation (USMEF) Economist Erin Borror explains that this will tighten Australia’s available supplies and help improve the competitive position of U.S. beef in key Asian markets, especially South Korea and Taiwan. In Japan, Australian beef faces lower import duties than U.S. beef, due to an economic partnership agreement enacted earlier this year. But the shift in supplies and prices could still provide some renewed momentum for U.S. exports to Japan. U.S. beef still lacks access to China, where Australia is the largest supplier.

TRANSCRIPT:

Joe Schuele: In this U.S. Meat Export Federation report, we speak with USMEF Economist Erin Borror. She discusses the long-awaited slowdown in Australia’s beef production and exports.

Erin Borror: We’d already gotten through our drought situation here in the U.S., but Australia was still liquidating historically large numbers, about two and one-half years of drought-infused increases in production. Everyone has been watching an knowing that these kill levels were not sustainable, so starting the year Meat and Livestock Australia was expecting about a 14 percent drop in production and about a 20 percent drop in exports. But so far in the first half we hadn’t seen any slowdown materialize and exports continued to out-pace last year’s record levels. But finally in July we saw their exports come in line with last year and in August they were actually down about 5 percent from last year’s strong pace. This coincided with a decrease in Australia’s kill numbers, which have slowed since June, and are now running well below last year.

Joe Schuele: Borror says the tightening of Australia’s supplies should help narrow the price gap in key Asian markets.

Erin Borror: So as we look at smaller Australian supplies going forward, we do expect our competitiveness to improve in the Asian market, especially in places like Korea and Taiwan, we are already gaining market share. But where Australia really has advantage is Japan, with their economic partnership agreement they’ll see more than a 10 percentage point tariff advantage next year. The other place where they’ll maintain a clear advantage is China, where they have direct access, and they are China’s largest supplier. And, of course, U.S. beef remains out of that market. So, two key areas where they maintain significant advantages, more on the policy side, but across the markets where we do have access, even though they’ll still expect the strong dollar disadvantage. We know that our competitiveness on these Asia cuts is already improving.

Joe Schuele: For more on this and other trade issues, please visit USMEF.org. For the U.S. Meat Export Federation, I’m Joe Schuele.