Increased competition and trade disruption for Australian beef and cattle exports

December 15, 2016 10:10 am

Competition within the global market for beef is increasing with Australia’s major export competitors, including Brazil and India gaining market access to key Australian markets of China, USA and Indonesia.

The entry of Brazilian exports in the Chinese beef market in 2015 has had a significant impact on volumes of Australian exports to China with 2016 Australian exports falling more than 50% to 78k tonnes whilst during the period 2014 – 2016 Brazilian beef exports expanded from 100 tonnes to 111 thousand tonnes. The Chinese market continues to be price sensitive and with a pricing advantage exceeding US $1.00/kg, Brazilian beef export volumes to China will continue to outperform.

Australia’s disease-free status; world class traceability and food safety systems continue to provide competitive advantages and allow Australia to differentiate its product from its competitors and achieve a premium for its exports. Whilst this remains the case, this market advantage is steadily being eroded by lower-cost competitors including:

  • Brazil gaining access to export fresh/frozen beef into the US – compliance with protocols and a finite quota is anticipated to limit the volumes of beef exported by Brazil to the US in 2017, however it is anticipated that Brazil will use this approval to apply for access to higher value premium US markets.
  • Brazil regaining access to the Chinese beef market
  • Indonesia permitting the importation of Indian Carabeef (buffalo)

Globally India is the fourth largest beef producer and the 2nd largest exporter of Beef & Buffalo (Carabeef). In 2016 India exported some 1.85 million tonnes of beef and carabeef with key markets including Russia; China and MENA.

Indian Carabeef represents a significant threat to Australia’s $600 million export cattle trade to Indonesia and has the potential to disrupt the northern beef cattle supply chain and market. Indian Carabeef currently trades at a discount of $1.00 – $1.30 per kg to Australian frozen beef and has become increasingly popular within the Indonesian food manufacturing sector.

Australia’s live exports to Indonesia have been significantly disrupted with livestock export permits for the final quarter of 2016 approximately half of what was expected. This lack of visibility on live export permits; a 10% VAT on live cattle imports; and a requirement for Indonesian feedlots to import 20% breeding heifers has impacted on the numbers of cattle exported to Indonesia from northern Australia.

The northern Australian cattle supply chain is at risk of a significant disruption to live cattle exports due to competing Indian Carabeef product and a requirement for the export of 20% breeding stock with every shipment of export cattle. These variables have the potential to put downwards pressure on cattle pricing and redirect large numbers of cattle from the northern live export supply chain into southern feedlots and abattoirs.

Mark Cook