Australia's recent meat export performance


  • 18/08/2017
  • Industry Reports Insight

Executive Summary

Australia’s beef industry makes a large contribution to Australia’s total agrifoods exports and is the cornerstone of this export success story. Our beef industry is outwardly focussed and globally competitive, with 74% of domestic production being exported to dozens of countries including the United States, Japan, South Korea, China and Indonesia. We also contribute to the global supply of lamb meat products, chicken and pork, but we remain a net importer of pork.

While our exports have increased in recent years, we have a history of exporting grass fed frozen beef, lamb and mutton, and live cattle and sheep. The relative quality of our exports have improved only marginally in the last five years. The information suggests our beef exporters undertake minimal or small levels of processing or value adding, with a high level of exports being frozen beef protein that make their way into commodities like hamburgers.

Total meat exports (including beef, lamb, mutton, pork and chicken) (at $12.1 billion) account for just under one-third of total agrifoods exports. The top three meat exports are frozen beef, chilled beef and lamb.

Australia’s principal meat export markets (in 2015-16) are: United States (28%), Japan (18%), Korea (12%) and China (9%), countries that we have preferential trading agreements with.

The recent preferential trading agreements with these countries have expanded our access (via a reduction in tariffs and/or an increase in quotas) to these large domestic markets and, partly therefore, our recent export performance has been strong.

While our recent export performance has seen impressive nominal increase in export performance there is several drivers outside the control of Australian producers that have significantly contributed to our recent export performance.

The main factors driving our recent export performance has been a decline in beef production in the United States and a permanent (structural) increase in protein demand from a growing Chinese middle class in conjunction with limited growth domestic beef production, both contributing to price rises in our export markets. In addition, the depreciation of Australia’s exchange rate from parity with the US dollar back to long-run levels since 2012-13 has also supported rising meat prices.

Beef

Australia’s beef exports grew by 83% in real terms between 2009-10 and 2015-16 from $4,517 million to $8,285 million. The United States accounted for 41% of that growth (or $1,525 million). China accounted for 22% (or $835 million) of the growth and South Korea accounted for 16% (or $602 million) of the growth in Australia’s beef exports.

Over the period 2011 to 2015, Australia’s beef production increased by 20.9% from 2.1 million tonnes to 2.5 million tonnes. The United States beef production declined by 9.0% over the same period, from 11.9 million tonnes to 10.8 million tonnes. China’s beef production increased by 5.4% over the period, well below its real GDP and real income growth over the same period.

The type of beef exported indicates the comparative advantage Australia has in the international market. From the data outlined in this report Australia has a comparative advantage for relatively lower-grade beef-based commodity products. Value adding is the level of value generated by a product through the production process, minus the input costs. For beef, the typical indicators of the level of value-added generated through the production process is the type of feed stock used (grass or grain) and the transportation method (chilled or frozen).

Australia’s beef exports are globally competitive, but are generally low-value exports (grass fed for ground beef) rather than high-value products (grain-fed for high value sale). According to Meat & Livestock Australia, in 2016, 75% of Australian beef exports to the US were low-value manufacturing or hamburger beef (MLA). The US cattle herd has been near historic lows, fuelling increased demand for imported beef.

Following significant investment and capacity expansion through the earlier part of this decade (supported by both Australian and Chinese investors), cattle herd number have declined (from 30 million head of cattle in 2013 to 26 million head in 2017) following significant droughts in northern and western Queensland in recent years. That said, with a recent (2016-17) good wet season in the Top End, herd numbers should steadily rise over the next two years according to leading analysts.

Recently, there has been some disruption in the global beef market. The Indian Government has announced its intention to ban the slaughter of all cattle, which would mean, if enforced, India’s 20% share of global beef exports would decline almost immediately. At present 18 (of 29) Indian State’s ban the slaughter of cattle and a further 7 State’s tightly regulated the industry. Further, the United States has recently banned beef imports from Brazil citing ongoing quality and health concerns. The United States Department of Agriculture cited “public health concerns, sanitary conditions, and animal health issues”. These two events should be monitored closely as they provide further opportunities for Australia’s beef producers.

Lamb

Australia no longer ‘rides on the sheep’s back’ and our economy (and range of goods and services exports) is significantly more diversified than in the first half of the 20th century.

Nonetheless, Australia still exports a significant amount of lamb and, to a lesser extent, mutton. Our live sheep trade is also strong, particularly to the Middle East.

Australia’s sheep meat exports grew by 49% (in real terms) from $1.5 billion in 2009-10 to $2.3 billion in 2015-16. By value, lamb meat exports account for almost three-quarters of total sheep meat exports with mutton making up the remainder. In addition Australia exported 1.9 million live sheep in 2015-16, account for $228 million of export earnings. The live trade export market has been in steady decline in recent years, falling by 33% (by value) over the period 209-10 to 2015-16.

Australia’s primary lamb meat export markets are the Middle East (27.9% of total exports in 2015-16), the United States (22.2%), China (15.0%), the European Union (4.1%) and Japan (3.4%). Since 2009-10, China’s share of Australian exports has doubled, the Middle East’s share has increased by 6.7 percentage points, while the EU’s share has fallen and the United States’ share has fallen marginally by 1.3 percentage points.

Pig

In 2015-16, Australian pig meat exports totalled $128 million. Australia is a net importer of pig meat. In 2015, Australia exported 41,000 tonnes of pig meat and imported 335,000 tonnes. The two major players in the global pig meat export market are the European Union (33.1% share of global exports) and the United States (31.5%).

The major importers of pig meat are Japan (18.9%), China (15.3%) and Mexico (14.6%). The global pig meat market is highly specialised and this is reflected by the fact that the major economies both import and export significant amounts of pig meat.

Chicken

In 2015-16, Australia exported $46.9 million of chicken meat. The leading chicken meat producers in 2015 were China (15.1%), Brazil (14.8%) and the European Union (12.2%). Most of the production in these large countries is consumed domestically. Australia is a small net exporter of chicken meat. In 2015, Australia exported 32,800 tonnes of chicken meat, representing 2.9% of domestic production. There is no significant importing of chicken meat apart from high-value specialised products.


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