It has been well documented that Australia’s herd and flock rebuilding efforts would be felt in export markets this year. With five months of data now on paper, it’s clear to see the impact its increased production is having.
A sustained improvement in demand from key markets couldn’t come soon enough to help offset the increased volume of Australian product competing directly with our exports. Yet most markets are still showing some hesitancy.
Focusing on beef first, in the five months to May 31, Australia has exported 384,000t of beef. This is 65,000t more than the same period last year and a touch behind five-year average levels. In comparison, New Zealand exports over the same period are expected to push to around 240,000t once May’s figures are in.
What these figures show is Australia rapidly returning to the production levels of four to five years ago. Back then Australia was plagued with constant drought conditions, which eventually sent them into liquidation phase, unravelling their cattle numbers.
Compared to recent years, Australia has a slightly different focus on export destinations. While Japan remains the largest market for Australian beef (on volume) season-to-date, it’s barely clinging to that position. After two years of struggling export volumes, amid political differences, Australia has renewed its focus on China. A reducing volume of United States beef into this market, Australia’s larger supply, and Brazil’s export suspension in recent months, have all helped Australia regain some traction.
In the past two months China has claimed top export destination for Australian beef, and this trend is likely to continue in the months ahead. However, Brazilian exports to China are expected to recover, leading to some likely congestion in a market that hasn’t economically recovered to the extent many were banking on.
In the time that Australia has focused on rebuilding cattle numbers, Brazil simply focused on growing its herd and subsequently its export volumes. Brazil was always subtly ahead of Australia in the global export stakes, but that subtle difference ballooned to over 1.2 million tonnes last year.
If Brazil’s production shows no signs of slowing and Australia continues to ramp up, this will help balance global supplies amid the expected decline in US beef production this year.
Australia has also turned its attention back to the US market this season, already shipping an extra 21,000t there this year. While this is significantly more than the past two years, it’s still a way off pre-2020 volumes.
Nevertheless, increased volumes of Australian beef have hit this market right as our own autumn production has ramped up. Softer-than-expected beef demand has given the US the upper hand and subsequently imported beef prices have come under pressure.
When it comes to lamb production, it’s been full steam ahead for Australia. Barring one or two weeks, slaughter rates have been well ahead of last year. The total Australian lamb kill is up by over 500,000 head for the first six months of this year. Surprisingly, despite the faster slaughter throughput, exports for the first five months of this year are still trailing last year’s paltry level by 5000t, to 117,000t.
However, they gathered some significant momentum last month with exports soaring to their highest level since May 2019 at over 28,000t. If slaughter rates continue to build, export volumes will promptly follow. While some will argue export markets are absorbing this increase in supplies, it does come at a cost with pricing pressure developing in key markets that Australia supplies. Unfortunately, these are many markets that NZ relies on, and until this year we have had the upper hand in driving pricing direction.
This article was written by AgriHQ analyst Mel Croad. Mel reports provide key insights into what makes our sheep and beef markets tick. Subscribe to AgriHQ reports here.
