Big drop in beef exports

Just 88,786 tonnes were shipped, the lowest full-month volume since April 2018 and an 8 per cent fall on previous month.

At the same time last year 115,000t were exported which puts the year-to-year comparison at a massive 23pc drop.

With the exception of short-month January, every month this year so far has held export tonnage well into the 90,000s with May falling not far short of 100,000t.

The July figure is therefore an indication that the run of slaughter cattle has finally started to falter, a factor much anticipated in processing circles.

Last year it was harsh drought conditions which drove cow slaughter to exceptionally high levels. March through June 2019 saw female percentage of slaughter at 58 or more.

The good rain received mid-January through February this year was no doubt instrumental in that percentage dropping to around 52 but then somewhat surprisingly it trended back up again to almost 57pc in May.

Perhaps the lateness of the break was cause for some reticence to engage fully in rebuilding breeder numbers and rather use the feed to take advantage of the very good slaughter money on offer.

Turning rather than holding them was probably responsible for the April/June spike in the female kill but that seems to be trending down once again.

With good winter rain across large areas of the eastern states it may well be that the turnover cows will soon be played out and some serious herd rebuilding start to emerge.

That will make life very difficult for processors and a likely continuation of lost days for some time yet.

Looking at individual export destinations, China is the standout because of the sheer magnitude in drop off in volume.

Two months ago after its remarkable recovery from coronavirus, China was roaring back toward the sort of tonnages seen in the latter half of last year.

But since its 24,300t take of Australian product in May, the wheels seem to have fallen off quite dramatically.

June saw the figure drop to 17,000t and then July saw a further fall to just 12,554t.

That amounts to a 48pc fall in just two months and a whopping 55pc collapse on same time last year.

A number of factors would seem implicated.

High volumes of product going into bonded storage late last year for China customs clearance on January 1 this year would have contributed to triggering the 2020 Safeguard threshold of 179,687t in late June.

The resultant increase in tariff from 4.8 to 12pc for the rest of this year puts Australia on the same tariff level as South American suppliers Brazil, Argentina and Uruguay and thus at a serious disadvantage because of their ability to supply significantly cheaper product.

Then there are the four Australian beef plant suspensions which remain in place and the coronavirus testing regime imposed by China on imported foodstuffs including beef.

The latter reportedly has some suppliers worried that this could lead to arbitrary suspensions and thus a tendency for them to avoid trade on that basis if suitable alternative markets are available.

On a year-to-date basis to July, exports to China amount to 133,735t which relegates it to Australia's third largest market behind Japan and the United States.

China was by far Australia's largest beef market in 2019.

The US meanwhile has retreated from its 26,000t surge in June with 23,788t in July.

This is not surprising; as explained previously in this column the May/June spikes were brought on initially by abnormal US domestic wholesale market movement and compounded by extra product redirected from the suspended Australian abattoirs.

Early figures for August suggest the volume to the US will settle back to around 19,000-20,000t.

This may fall even further if predictions of higher supply levels of domestic lean in the US through heightened beef and dairy cow slaughter and increased imports from Brazil are realised later in the year.

At the higher-value end of the market, volume to Japan has come off slightly on previous month but taken a solid hit year-to-year.

July's 20,936t is down by 3pc and 24pc in those respective comparisons.

Unfortunately as previously noted, Australia's stake in the Japanese market is likely to come under severe competitive pressure from the US.

On the plus side for the US is its improved tariff position, which puts it on equal footing with Australia, and its elevated supply of fed beef emanating from coronavirus-induced back-up of cattle in feedlots.

On the downside for Australia is a strengthening dollar, a marked reduction in feedlot numbers and according to MLA, the highest priced cattle in the world.

Widespread rain through the southern states and southern parts of Queensland last week has led to smaller yardings and strong prices at the early markets this week.

At Wagga, numbers halved to just 1490.

Virtually no bullocks were yarded but the 90 odd heavy steers reached a whopping 414c/kg and averaged 395c (around 730c dressed). A domestic operator and southern processors made the running.

There were only about four decks of heavy cows in the offering and these were within 1-2c/kg of last week's strong averages.

In southern Qld, one major processor adjusted grid rates up by 10c taking the majors to 640c for 4-tooth ox and 560-580c for heavy cow.

However, more money on the table is not expected to bring forward any significant number of extra cattle.

Lost time is still being experienced and this is expected to carry on into September.

Little inquiry is coming in to book oats cattle and despite reports of some excellent crops, there would appear to be limited numbers of slaughter-type cattle on them.

There is increasing concern that the usual last-quarter surge will not eventuate, making for a very ordinary end to the processing year.