TRADE - Beef exports take a licking, but keep on ticking

With international borders closed, America’s hospitality industry flailing, and China imposing beef bans, what does the future hold for cattle farmers?

Words IAN LLOYD NEUBAUER

As the world's largest exporter in dollar terms, traders predicted consumption of Australian beef overseas would see a big decline because of COVID-19 market and logistics disruptions – predictions that gave beef farmers in NSW still reeling from the worst droughts and bushfires in living memory another reason to lose sleep.

“About 70 per cent of Australian beef is sold overseas so the ability to maintain market access is absolutely vital to the industry and all the industries that depend on it,” says Warwick Powell, an adjunct professor and economist at the Queensland University of Technology. But the fall has been softer than projected, with data for April showing only a 2 per cent drop in beef exports compared to the previous month March when the World Health Organisation declared COVID-19 a global pandemic.

“Currently the pandemic has not had a big effect on farmers in NSW because with most parts of the state transitioning out of the drought, people are withholding stock to build herds up again. That's caused a bit of a shortfall and kept prices high,” says Derek Schoen, a grazier in Corowa on the NSW/VIC border who chairs of the NSW Farmers cattle committee.

“It's not exactly business as usual – inputs like parts for tractors are hard to get and new tractors are almost impossible to get hold of,” Schoen says. “But there is lots of optimism for the season ahead, especially here in the south of the state where we farmers no longer have to buy fodder and are fuel prices are at historic lows.”

A report by financial consultancy Deloitte confirms Australian agribusiness has“benefited from reduced competition” for inputs like crude oil that is trading at 50 per cent or less of its historical value; as well as “stark depreciation of the exchange rate. “Compared to the start of the year, the Australian dollar is around 10 cents lower than the US dollar,” the report notes, adding optimism was further buoyed by the fact “that people still need to eat”.

But people in target markets like China are changing the kind of beef they eat – and where they eat it.

“It is obviously a concern is that Australian beef is generally more expensive,” says Andrew Cox, MLA's general manager of international markets.

“During the lockdowns, discretionary spending has been down, events, weddings and banquets have been cancelled and restaurants have been closed,” Cox says. “So a lot of businesses that buy Australian beef are struggling because they're not pulling through our products. That hits the carcass balance because people in these markets are not consuming highquality cuts like tenderloin.”

Sino-Australian relations are also a concern. In May, four large Australian export beef abattoirs, including one in NSW, were suspended from accessing the Chinese market.

Beijing said the suspensions were imposed because of inconsistencies in “labelling and documentation” for shipments made in 2019.

But some in Canberra suspect the move was politically motivated – blowback for Australia's call for an independent probe into the source and spread and COVID-19. “I can understand why people draw a link,” Trade Minister Simon Birmingham said at the time.

DEEP CUTS: As overseas businesses struggle and as a result discretionary spending drops, markets are not consuming high-quality beef cuts.

John Seccombe, chairman of the Northern Rivers Meat Cooperative, one of the four abattoirs temporarily banned, does not believe this is the case. “We are aware of those assertions but we do not share them,” he says. “This is a technical issue about labelling that goes back six to 12 months.”

Australian beef exports to the US are also in a significant state of flux, Seccombe says, following the closure of scores of meat processing plants there because of workplace-related COVID-19 infections: “America right now is a very complicated market. Their foodservice sector has collapsed and the American supply chain is in all sorts of disarray, so it's hard to pick where the market is heading. But since a lot of the meat we export to America is frozen lean trim into hamburgers, our beef exports are going quite well there.”

Professor Powell agrees: “The US market has been significantly affected by the closure of meat plants and that has created more demand for Australian beef. But we could experience possible bottlenecks because of access to containers and ships about to dock in ports.”

The issues are very fast-moving but MLA remains confident that Australia's beef exports will ride out the current COVID-19 storm.

“There is a lot of volatility at the moment but farmers will see there are a lot of positives,” says Cox. “The global goods supply chain has held up really well and our customers are getting products to market despite border closures. And we're hearing lots of evidence that in this crisis, consumers are gravitating even further towards foods with good strong eating credentials they can trust – like Australian beef.”