THE climbing Australian dollar is creating big concern in the beef export arena, exacerbating declining United States cattle prices and soaring grain costs.
This week’s jump to US79 cents, a two-year record, appears to have taken many by surprise, with reports of unsold meat on the seas about to land a big hit to Australian businesses.
Talk has turned to the likelihood of the Australian cattle market bearing the brunt of the mounting pressures on the finished end much faster than anticipated.
Indeed, several NSW and southern Queensland processors have confirmed they have already, or will in the next 24 hours, reduce grid prices, with feeder cattle the first to feel the effects.
One major exporter said inventory in cold stores across Australia was fast increasing, given the lift in slaughter during June and the tough international trading environment.
“It won’t be October or November the big correction in the cattle market comes, it will be much quicker,” he said.
The increase of meat in the system seems to have happened overnight but exporters explained the effects of something like lower US prices can be immediate.
It’s simply a matter of a competitor accepting the lower price offered by US importers and a new benchmark is set.
Volatility on the world stage has been at a high this year: the US flexing its muscle in North Asia, scandals in Brazil raising quality question marks over their product and Indian government moves to ban the sale of slaughter buffalo, just to name a few.
Some of those events have already had a flow-on effect.
Australia’s share of the Korean market has dropped from 53 per cent to 47pc on a volume basis so far this year and likewise, in Japan, our share has declined from 56 to 49pc, according to the latest figures from Meat and Livestock Australia.
Still, MLA expects the Korean market will grow in the long term.
The complete wash-up for Australia of fast-changing global events is simply impossible to gauge with any certainty.
MLA believes the forecast 2pc year-on-year rise in Australian beef production for 2017 should see exports match the 1.02m tonnes swt shipped last year.
This would result in the fifth consecutive year above one million tonnes exported, according to MLA’s revised cattle industry projections, released this week.
Despite current upheavals, the foundations are solid - a rising middle-class in Asia delivering ever-increasing demand and Australia’s firm reputation as a quality, reliable and ethical producer.
As well, MLA’s manager of market information Ben Thomas says: “Every time a year ticks over, we see another drop in tariffs in three of four of our largest export destinations, which serves to assist our competitive position.”