AUSTRALIA'S three largest beef export markets, taking over 62 per cent of Australia's total exports in 2021, sat side by side in North Asia, namely Japan, Korea and China.
These are all markets that 35 years ago were still under tight government control and for Korea and China were small, undeveloped and embryonic destinations for red meat.
The liberalisation of the Japanese market was announced in 1987 and although it took some years to fully implement, it changed the Australian beef industry forever.
US analysts had surmised that the US beef industry would be the major benefactor of Japanese liberalisation. Australia to this point had only supplied mostly grass-fed beef under the controlled tender system in place.
US packers thought they would capture most, if not all, of the premium end of the market while Australia would be confined to the struggling commodity end.
They underestimated Australia's ability to develop a feedlot industry and adapt grain and grassfed production systems to deliver against evolving Japanese requirements.
The Japanese market provided the platform for the considerable expansion of the Australian industry's grain-fed and chilled beef reputation that it benefits from today.
In 2021 Japan represented 26.3pc of total beef exports.
Due to low slaughter levels at present as the Australian herd rebuilds, Australia only exported 18,551 tonnes to Japan in the month of July, down 17pc on the previous month and 24pc on the previous year. However despite this period of lower export volumes, Japan has still maintained its position as our premier export beef market, representing 26.8pc of total volume in the first seven months of this year.
This compares favourably with the greater volumes of past years where it represented 28.8pc in 2017 and 28.1pc in 2018.
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Our major competitor in Japan, the US, currently finds itself in a herd liquidation phase spurred on by severe drought conditions in many parts of the country.
This has resulted in large volumes of US grain-fed beef being made available on the Japanese market. It is probably a good thing that our herd rebuilding and liquidation phases are out of sync with each other especially in the high quality chilled and grain-fed end of the market.
China potential
We identified two weeks ago in this column the current and future potential of the Chinese market as arguably the largest importer of beef in the world.
An important part of that potential is the growth in grain-fed beef imports which have continued to defy the challenges posed by shipping delays, port congestion and the pandemic.
The US Meat Export Federation estimates that China's combined imports of grain-fed beef from Australia, the US and Canada expanded by at least 20pc year-on-year in the first six months of 2022, helped by a 55pc increase in US shipments.
The USMEF also believes that some 12,000 tonnes of beef shipped from Russia to China in the first six months of this year was also grain-fed beef, despite the Ukrainian invasion.
China's January to June beef imports of 1.12 million tonnes was 2.2pc above last year but the US$7.7 billion value of that tonnage was up close to 40pc, a reflection of the ability of the market to pay for quality and also a sign that demand remains resilient in the face of the lockdowns and other challenging issues.
The biggest change in the Korean market this year has been the decision by the Korean Government to address high food inflation by opening tariff-free import quotas for pork and beef. A 100,000 tonne duty free beef quota opened on July 20.
Australia's current tariff for beef into Korea is around 16pc but the US is only 10.7pc. For the purpose of this quota both countries will pay zero tariffs as will all other suppliers. Canada and NZ currently pay 18.6pc and Uruguay and Mexico 40pc. With tarrifs removed as a factor, the lower priced suppliers will likely win the day.
This special quota includes 75,000 tonnes of frozen beef in two categories - for table distribution or for further processing plus 25,000 tonnes of chilled beef.
Normal market sales are direct through commercial importers but this quota, like the old government import quota days, is being managed through two industry associations, the Korea Meat Association and the Korea Meat Industries Association.
Importers, retailers and domestic meat processors have to apply for an allocation.
As a reflection of the demand at the lower prices, as of July 26 the entire 45,000 tonne portion of the quota reserved for frozen beef for table meat had already been exhausted and the rest is likely to move quickly.
It will be interesting to see what impact this zero tariff quota has on the existing trade.
US Salmonella declaration
In an interesting development, the US Department of Agriculture announced last week proposed new regulations that, when enacted, will declare salmonella as an adulterant - a contaminant that causes food borne illness - in breaded and stuffed raw chicken products.
Under the proposed regulation, failure to reduce salmonella levels to specific standards would result in the product being considered adulterated and could lead to plant closures.
The move marks the beginning of a broader effort by the USDA to curtail illness in the US caused by the salmonella bacteria which sickens 1.3 million Americans each year. It sends more than 26,000 to hospital and causes 420 deaths, according to the Centre for Disease Control and Prevention.
The response from the US meat processing sector has been cautious although the National Chicken Council in the US expressed concerns that "the precedent set by this abrupt shift in long standing policy was made without supporting data and was not science based."
There has been no discussion about how this might translate to beef but the interest for the Australian red meat industry is that in 1994 the USDA took a similar step by declaring some strains of ecoli an adulterant in ground beef. They launched a testing program for the pathogen that ended up causing significant disruption and cost for those Australian beef processors supplying manufacturing beef and trimmings to the US market.
Some product recalls at the time because of ecoli positives during testing proved extremely costly to those involved.
Both ecoli and salmonella are naturally occurring organisms. At present the new salmonella regulation is still only a proposal and confined to particular raw chicken products but now the decision has been made by the USDA, they do agree that this is a starting point and that ' by no means are we done."
There's More To Meat
The Australian Meat Processor Corporation launched this week its new national campaign "More to Meat" highlighting the important role meat processors play in regional communities and the sector's significant contribution ($21 billion) to the national economy.
Some 300 communities around Australia are supported by a red meat processing facility and is often one of the biggest employers in town. Visit: moretomeat.com.au.