15 Mar 2018
The many twists and turns in global trade and geopolitical conditions have caught even the most seasoned commentators by surprise in recent months.
As Australia’s beef industry gathers in Rockhampton this week to mark Beef Week’s 30-year anniversary, much of the discussion will focus on shifting regulatory and trade arrangements and what they could mean for one of Australia’s most-talked-about industries.
"There are potential gains in sight for Australian beef exporters in this uncertain period.”
ANZ’s latest Agri Infocus report, High Steaks, examines the volatility and finds while it can create uncertainty, there are potential gains in sight for Australian beef exporters in this uncertain period.
Australian beef producers have benefited from growing demand in Asia – mainly Japan, South Korea and China – however competition from the US, Brazil and Uruguay has also intensified.
On many Chinese supermarket shelves Australian beef sits side-by-side with its American rival and is marketed and priced similarly.
China recently applied tariffs to US agricultural products including pork, fresh fruit, wine and nuts. US beef, one of Australia’s fierce competitors, is at risk of further tariffs following its re-entry into the Chinese market in June 2017. This could ultimately restrict market access and weaken a major competitor of Australian beef exporters.
Reduced US competition could also be aided by the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) – which currently excludes the US.
The CPTPP is likely to be particularly advantageous for Australian beef producers exporting to Japan, where a tariff on Australian frozen and chilled beef will drop from 27.2 per cent and 29.9 per cent respectively to 9 per cent over 15-years.
Although there may be an upside for Australian producers if the US’s position in Asia is diluted, shifting regulatory and trade arrangements may also lead to the depreciation of the Australian dollar and reduced global demand and growth in the longer term.
However, the world’s markets are increasingly turning to Australia to satisfy the mounting need for quality protein. Pleasingly, Australia’s beef industry is also expanding in its global significance, representing around 15 per cent of global beef exports despite producing just 3.5 per cent of beef globally.
Behind increasing demand is the well-documented Asian middle class - projected to grow to 3.5 billion by 2030 - and its rising consumption of meat and protein.
A risk to our industry’s ability to meet demand is its dependency on Queensland, which accounts for 54 per cent of Australia’s beef exports followed by NSW and Victoria at 18 and 15 per cent respectively.
A series of poor Queensland wet seasons commencing in 2011-12 caused producers to destock and sell breeding cows to meat markets, contributing to a declining national cattle herd from 2012 to 2016.
With large market concentration in one state, changes to Queensland’s herd, weather and export orders are often felt across the nation, so building the sector in other states, should be a major consideration for both industry and government.
The industry must also work to rebuild its herd. Australia’s herd represents just 2.5 per cent of the world’s beef cattle herd and has declined for three consecutive years to the end of 2016.
Ongoing dry conditions could lead to further decline which may put additional pressure on prices.
During the same period the US has been rebuilding its herd and Brazil’s continues to expand steadily. This is likely to result in more US and Brazil beef available for export at increasingly competitive prices, quite possibly softening Australia’s competitive position.
Despite various domestic and global challenges that could impact beef’s long-term outlook, what’s expected to remain unchanged is the adaptability of our beef producers.
In addition Australia’s reputation, geography and strengthening trade ties should continue to provide the industry with enviable access to some of the world’s fastest-growing markets.
As the skies opened up with rain in Rocky there’s no doubt Australia’s beef industry will be hoping for sunnier times ahead.
Mark Bennett is Head of Australian Agribusiness at ANZ
The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.
15 Mar 2018
20 Mar 2017