Global Markets - state of play

By Michael Finucan, MLA General Manager – International Markets

The early months of 2017 have proved challenging for marketers of Australian red meat in export markets, with intensifying competition, market access hurdles, Australian supply constraints and lukewarm economic conditions in some markets. However, demand remains strong for Australian product, underpinned by our integrity systems and our superior reputation in the minds of consumers in key markets.

Beef trends and markets

On the beef front, Australian cattle supplies remain tight at the same time that key competitors are gaining a foothold into some of our important markets.

In the US, Brazilian beef is gaining increased market access while the Real is historically low and traditional markets like Russia remain unattractive to Brazilian exporters. Brazil is currently awaiting USDA approval to start shipping grinding beef to the US. MLA is watching this situation closely as this access would intensify pressure on Australian manufacturing beef prices. Prices of US beef are also subdued as its herd is currently in the low price point of the cattle cycle. This is also putting downward pressure on Australian prices.

MLA’s Rob Williams (International Business Manager for North America) will expand on this and other market conditions in the US in this month’s ‘in focus’ feature.

Indonesia remains Australia’s most important live cattle market and a potentially large market for boxed beef. Following significant advocacy work, Australia has improved its market access with an expanded quota for secondary cuts and revised conditions for live cattle. The Indonesian Government’s quest for self-sufficiency and reduced beef prices has seen the introduction of Indian buffalo. This is making the going tough for Australian exporters with our supply base so low and cattle prices remaining high.

There is a positive lining in global markets. We continue to see growth in Asia with rising incomes and the emerging middle class. Australia continues to leverage our powerful country of origin reputation to differentiate from our competitors.

Chilled beef exported to China and other South-East Asian countries is preforming well. Australia’s high quality grainfed product remains a key differential from South American competitors in some of these markets.

In our backbone markets of Japan and Korea, our integrity systems remain front-of-mind for consumers and pasture assured grassfed product continues to perform well as consumers demand a clean, green beef product. You can read more about this in Andrew Cox’s article (Andrew is MLA’s International Business Manager, Japan and Korea).

Sheepmeat trends and markets

Like beef, Australian sheepmeat supplies are tight yet overall global demand remains strong. Livestock prices remain at record or near record levels.

Our quota in the EU is the limiting factor to expanding the presence of Australian lamb (and beef) in this valuable market. MLA continues to advocate in-market and work with the Australian Government to free up trade in this region.

You can read more about this, the impact of Brexit and the latest on free trade agreement negotiations in Josh Anderson’s article (Josh is MLA’s International Business Manager in Europe and Russia).

In China sheepmeat is a minor protein with consumption only 3kg per person per year. There is a large domestic flock that dominates the market which has a significant impact on demand for imported sheepmeat. Due to a large turn-off of local product in recent years, we have seen volumes of Australian exports decline in this market.

The US remains a growth market for Australian lamb. Read more about MLA’s latest marketing activities to grow demand here.

In the Middle East long-term growth prospects remain positive but there are some current economic challenges. Low oil prices, ongoing regional conflict and reduced tourism to the region, along with supply constraints and higher prices, have seen demand flatten. However, sheepmeat remains a popular and well-loved protein through the region and Australia is well positioned to continue to supply significant volumes to key Middle East markets. Australian sheepmeat imports to the region account for around 70% of total imports and opportunities for chilled carcases and higher value vacuum packed product remain strong as retail and cold chain logistics continue to become more sophisticated and westernised.

Southern Asia comprises of a diverse range of countries, ethnicity, religions and economies. With a combined population of more than 640 million and a rising middle income wealth, meat consumption is steadily rising. While the longer term prospects are bright, premium sheepmeat retains a small marketshare compared with alternate proteins such as cheaper forms of chicken, pork and seafood.

Malaysia remains the fourth largest export market for Australia sheepmeat, consuming around 25,000 tonnes amongst its largely Muslim population. Forequarter cuts are most popular and are used in traditional curry and barbecue skewer cuisines.

Singapore consumers underpin a solid annual importation of 11,000 tonnes of Australian chilled lamb and frozen sheepmeat into premium retail chains and high-end foodservice outlets, adding to the collective opportunity for Australian premium production in our global markets.

More information
Michael Finucan
General Manager – International Markets
mfinucan@mla.com.au