Whats wrong me old China?

The Detail

Trade tensions continue to rise between Australia and China. The Morrison Government’s recent announcement of impending legislation to veto agreements between state entities and foreign governments was squarely aimed at China.

Hot on the heels of this news was a fifth Australian meat works export access to China suspended due to the claim of unwanted chemical residues being found in shipments. Meanwhile overnight, Australia’s top grain exporter has been banned from sending any barley to China after claims of pests/weed seeds being found in shipments. It seems the trade tensions continue to escalate.

For details on barley suspension read ‘Shot across the barley bow’

The trade issues haven’t helped Australian beef exporters with a second consecutive month of Chinese demand remaining below the average seasonal trend. August volumes eased by 7% from July to see 11,722 tonnes shipped.

After such a strong performance in 2019 and earlier in the season for Australian beef exports the recent dip in flows has to be more than just high the Australian cattle prices and tight domestic supply, particularly considering the Chinese African Swine Fever impact to their pork production still poses a 17 million tonne gap in their meat protein requirements.

Indeed, total meat import data for the first half of 2020 into China for their top four source nations signals a worrying trend.

Unfortunately, the Covid19 impacts to our other key beef export nations are weighing on total flows, and the reduced domestic cattle slaughter/production levels this season are probably exacerbating the issue.

Total beef exports slipped 12% from July to August to record the lowest monthly volume this season at 78,021 tonnes swt. This is 22% under the five-year average trend for August and has dipped beneath the normal range that could be expected for this time in the year, according to the 70% range boundary.

Japan, our top beef export destination this season, continues to see lacklustre flows running 22% below the August average pattern at 19,661 tonnes swt. Likewise, the USA are sitting 28% under the August seasonal average level and South Korean consignments are 8% below.

Despite the reduced demand for Australian beef in the USA during August there was a changing in the ranking of market share for beef exports. The USA has now overtaken China in second place at 21.7% of total export volumes.