Global Markets Forum – opportunities amid challenging market conditions

With negotiators in Canberra this week for the second round of EU trade talks, MLA’s Global Markets Forum at Red Meat 2018 in Canberra was ideally timed.

The Forum saw MLA’s team of red meat market experts and some of Australia’s international customers unpack how Australia is staying ahead of our competitors in understanding changing consumer demand in our destination markets.

More than 700 red meat producers and stakeholders also heard how MLA is working with the Australian Government to turn road blocks into opportunities in export markets amid challenging market conditions.

Unlocking market access

MLA Global Manager - Trade and Market Access, Andrew McCallum, detailed the achievements of the Market Access Program, which is jointly funded by producer levies matched with processor contributions, in facilitating trade and addressing tariff and non-tariff barriers.

“Our emphasis going forward in terms of market access is with the EU and the UK,” Mr McCallum said.

He said Australia had made significant gains in market access through the trifecta of free trade agreements (FTAs) with Korea, Japan and China.

“The value of these FTAs should not be underestimated. If I was to quantify it, the trifecta of FTAs, Japan, Korea and China, are worth $20 billion over the next 20 years – that’s $1 billion in extra value just by removing tariff impost on our product,” Andrew said.

“If I were to break that down even further, and this is just the China FTA alone, it’s underpinning beef prices by about 8c/kg and underpinning sheepmeat prices by 13-26c/kg.

“We’ve also chalked up some gains in terms of non-tariff barriers. In Indonesia, we now have access for secondary beef cuts and offals, which were previously banned items. We’ve made some gains in in extending shelf-life in the Middle East for high value chilled product and similarly in Iran.

“Looking at future reform, we’ve got a lot of work still to do. We have about $1.6 billion in future value to reap out of FTAs.”

With the impact of non-tariff barriers on Australian sheepmeat, beef and goatmeat industries sitting at about $3.4 billion per annum, address non-tariff barriers is a key focus.

Targeting premium opportunities

The overall outlook for beef and sheepmeat in export markets is positive with demand forecast to grow, according to MLA Global Manager – Industry Insights and Strategy, Natalie Isaac.

“Global demand for beef has grown 20% over the last 30 years and sheepmeat over 50%,” Natalie said.

“Most major world institutions are forecasting 1-2% growth in the next 20 years, underpinned by population growth, increasing per capita income, growing middle class, urbanisation and greater trade access.”

Natalie said the focus for Australian beef is on premium growth opportunities, while for sheepmeat, educating consumers about how to cook lamb and focusing on foodservice, where people are more likely to try lamb, will help to unlock further opportunities.

“If we look at the trend in the average global beef price per kilogram of the major exporters, we can see differences. Eight years ago, the gap between the lowest and highest price was close to $2, this gap is now $5.”

Looking at sheepmeat, growing global demand has been driven by many regions, but in particular Asia and future growth is forecast to see this trend continue

She said the price trends for sheepmeat were also changing.

Historically, the sheepmeat price has been based on supply - as production goes down price goes up, and as production goes up, the price comes down.

However, in the last four years a new trend has emerged where price continues to go up as supply has increased.

Traceability is key

In maintaining and improving market access into destinations such the Middle East, Australia’s traceability systems are key, according to Premier Food Industries Manufacturing Manager, Matthew Robinson, who is based in Riyadh with the food processing company.

“Export approvals come and go in the region freely. Brazil was out of the region for two years from 2014 and 2016, and the US has only just returned this year after a lengthy absence,” Matthew said.

“It all boils down to traceability. Australia’s traceability systems are paying dividends for the Australian red meat and livestock industry in markets such as the Middle East.

“Australia has never been banned and that is a very strong selling point for your processors who are pitching meat into the region.

“From my side of things, when we’re dealing with customers who are demanding that continuity and security of supply for their restaurants and outlets, they want to be guaranteed that if they start a supply relationship, it’s not going to be closed after six months or one year.”