Aussie meat exports lose traction in the first half of the year
Australia’s total red meat exports for the first half of 2021 (Jan–Jun) totalled just over 711,000 tonnes swt, down 18% on the same period in 2020. Export value to May is down to a similar extent, announced Meat and Livestock Australia.
Taking a longer view, however, while the export volume for this period is lower than the five-year average pre-COVID-19 from 2015–19 due to supply constraints, growing global demand for Australian red meat has strengthened export value over this period. Export value for the first half of 2021 is higher than the pre-COVID-19 five-year average.
Australia’s total beef exports are down 24% for the calendar year-to-June on 2020 levels. However, chilled beef has performed somewhat better than frozen, as consumer demand at retail remains strong due to COVID-19 lockdowns still affecting foodservice in many markets. Grainfed exports have also fared better than grassfed, underpinned by an expanding feedlot sector, falling just 5% overall compared to -31% for grassfed. Australia’s total lamb exports are steady year-to-date and mutton is 10% lower. Similarly, red meat offal exports are down 15% year-on-year. By contrast, goatmeat exports are up 25% year-on-year in 2021 following a two decade low export volume of 6,583 tonnes swt in 2020.
One of Australia’s largest and most stable markets, beef exports to Japan have been 19% lower in 2021 so far versus 2020. This is in line with Australia’s supply constraints but also weaker demand, with Japan’s total beef imports 9% lower year-on-year in 2021 to May. Japan import demand for frozen beef has been somewhat weaker than chilled in 2021, reflecting the impact of COVID-19 restrictions on foodservice sales.
China’s suspension of six Australian plants continues, restricting exports at a time when China’s demand remains strong, supported by good COVID-19 control and rapid normalisation of foodservice and domestic travel. Despite a significant drop in pork prices in China in recent months, demand for red meat remains strong regardless of sustained high prices.
Both New Zealand and the US have taken advantage of Australia’s reduced supply, supported by New Zealand’s tariff-free advantage and US sole approval to supply HGP beef to China. New Zealand beef exports to China overtook Australia’s volume share in December 2020 and US volumes have increased rapidly to overtake Australia’s share for the first time in May this year. Regional industry analysts have taken to referencing a Chinese historical allusion to illustrate the situation – while birds are bickering over clams, the fishermen take advantage to profit by gathering all the clams.
Despite these challenges, China is still Australia’s largest red meat export market by volume, with a share of 21%, valued at almost A$2.6 billion for the 12 months ending May 2021. Demand for imported sheepmeat has been remarkably strong, with Australian exports of lamb down a modest 7% but mutton up 30% year-on-year.
Meanwhile, in Taiwan, both Australian and US beef have faced more competition from Paraguay, which has increased its market share of total beef imports from just 5% in 2018 to 20% in 2021 up to April, overtaking Australia (at 16% so far). Taiwan demand for Australian lamb has been exceptionally strong this year, with exports more than doubling year-to-date on 2020. This is partly in response to a decline in Australian mutton and goatmeat exports, but also a decline in sheepmeat exports from New Zealand.
Australian beef exports to the US are substantially down in 2021, particularly for manufacturing product. This is in response to a combination of factors including a higher Australian dollar, high cattle prices in Australia plus increased US domestic supply. Increased US supply is due to drought conditions in large parts of the country increasing slaughter rates, and larger carcases resulting from processing disruptions due to COVID-19, leading to an overall decrease in beef imports of 7% in 2021 to May. In addition, the US has increased imports of chilled beef from Canada and frozen boneless from Brazil this year at significantly lower unit prices than Australia’s at this time.
By contrast, Australia has exported more lamb to the US in 2021 so far, up 17% year-on-year and reaching an all-time record-high volume, with a notable uptick in the past two months, although mutton exports fell 26% for the same period.
Australian beef exports to Korea have been remarkably strong, particularly for chilled and frozen grainfed. However, frozen grassfed exports fell 17% year-on-year to June, as sustained high prices have weakened demand.
Korea’s total beef imports are up 5% for 2021 to May, with comparatively smaller suppliers such as Canada and New Zealand increasing their shares, offering lower unit prices, particularly for frozen product.
Demand for Australian lamb, particularly chilled, has continued to strengthen, with total lamb exports up 13% year-on-year. While New Zealand has also increased sheepmeat exports to the market to meet growing demand, Australia is in an advantageous position, supplying over 90% of imports.
Despite comparatively small volumes, Australian goatmeat exports to Korea reached all-time highs in 2021 at just over 1,000 tonnes swt for the first six months.
Australia fared comparatively well in the region for the first half of the year, as total red meat supply from competitors such as New Zealand, the US and India fell. Overall, Australian beef exports to the region are steady. While grassfed frozen exports are lower, demand for Australian chilled and grainfed product is strong, as affluent consumers continue to demand trusted, quality product at modern retail. The resilient supply capability of Australian grainfed sector which helps offset to some extent current shortage of grassfed products, has also assisted this demand.
Indonesia, Australia’s largest market in the region, saw lower export volumes of grassfed frozen beef, but has been steady for offal and sheepmeat in 2021 to-date. The country is still grappling with COVID-19 and has been hit harder by reduced consumer spending power than many developed markets.
Malaysian demand for Australian sheepmeat has remained steady for the year-to-date but softer for beef. Exports to Singapore have been weaker this year, except for grassfed chilled beef and lamb, reflecting government-driven imports of frozen/grassfed manufacturing beef in 2020 to support food security. The Philippines, Vietnam and Thailand have taken notably larger volumes of Australian beef across most key categories this year so far.
In the more price-sensitive sectors in the region, higher cattle prices in Australia have been a key factor in the region taking half the live feeder and slaughter cattle from Australia so far this year compared to 2020.
Strengthening oil prices and increasing COVID-19 vaccination rates are helping support some rebound in red meat demand in the MENA region. Australia’s total beef exports to MENA are recovering to pre-pandemic levels, up 22% year-on-year. Demand for frozen and grainfed chilled products is strengthening, particularly to the larger destinations of the UAE, Saudi Arabia and Kuwait.
However, lamb exports to the region are 21% lower year-on-year as a consequence of reduced sheepmeat demand overall, with global sheepmeat exports to the region down over 50%. The Qatar government’s removal of the subsidy on Australian sheepmeat from 2021 is one factor in reduced demand for both Australian boxed and live product, as that market digests the change. As a consequence, importers have shifted from lamb to mutton.
The region has taken 53% less Australian live sheep in 2021 so far compared to 2020, with the Qatar subsidy removal on Australian sheepmeat a key change in recent times.
The medium-term outlook for Australia’s exports is positive. On the supply side, sustained favourable conditions have encouraged herd and flock rebuilding, with increased production currently forecast to at least begin to flow through to exports in 2022.
While sustained high shipping and air freight costs have squeezed margins and weighed on retail prices for Australian red meat in export markets, these pressures are expected to gradually ease into the medium-term.
On the demand side, as key markets increase vaccination rates, resumption of at-home gatherings, foodservice and domestic and regional travel are expected to gradually lift consumption across channels.
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