AUSTRALIA’S manufacturing beef shipments to the US in October totalled just 8951 tonnes.
That’s the lowest figure for any month since January 1996 and a 45 per cent slide on the same month last year as exporters seek customers in other parts of the world less exposed to currency changes.
Russia, on the other hand, has seen a dramatic five-fold increase in Australian grinding beef imports in the past 12 months.
So significant are the currency impacts that some analysts are suggesting that after 40 years of dominating Australia’s grinding meat price trends, the US may no longer provide the price-setting role for 90CL manufacturing product.
Instead, those price signals may now be set by a basket of “second-tier” markets, including Russia and Indonesia.
The Australian dollar last week hit US101.83 cents – its highest point in 28 years.
Recent reports from the US illustrate just how profound the impact of currency fluctuations has been.
US cattle Buyers Weekly publisher, Steve Kay, reports that a record price premium has emerged for imported lean (90CL) beef over US domestic 90CL beef – a development that is now causing headaches for importers and some US buyers.
While total beef imports to the US for the year so far are down only five per cent on the equivalent period last year, imports from Australia (predominantly frozen 90CL) are down 27pc and from New Zealand, six per cent.
So far this year Australia has filled only 40pc of its tariff-free US quota of 379,0000t, sliding to second place behind Canada as the largest outside supplier to the US.
US market analyst, Graeme Goodsir, said the import trade remained very light owing to Australian, NZ and Uruguayan exporters selling at higher prices to other world markets to counter the weak US dollar.
Reduced imports meant that a fortnight ago imported 90CL beef was being offered at more than US170 cents a pound landed. That compared with fresh domestic 90CL at around US146c. Import prices were US6-10c/lb beyond any “realistic level”.
“There hasn’t been such a huge price distortion since Australia began exporting beef to the US in the 1950s,” Mr Goodsir said.
“Some importers can’t buy any imported beef, so they are resorting to buying fresh domestic cow beef, freezing it and trying to sell it to users of lean imported beef.”
MLA’s North America region manager, Scott Hansen, said up to October Australian exports were down 50,000t shipped weight compared with last year.
“To put it into some context, that decline is about the same as Australia’s entire boxed beef exports to Indonesia in 2009-10, and twice the amount sold to Russia.”
Mr Hansen said while currency movement was the overwhelming factor in the decline in trade, weather and other supply-related issues out of Australia had also contributed to the situation.
“It’s not as if there is a weakness in the US marketplace in terms of demand, or a real supply issue out of Australia,” he said.
“The reason why Australia is looking at such low volumes into the US this year is purely because US purchasing power has been eroded at exactly the same time as alternative customers have vigorously entered the marketplace, and the (Aussie) dollar has shot up against the greenback.”
He stressed, however, that while record premiums were evident in the US for grinding beef, this needed to be interpreted appropriately.
“Prices hit US178c/lb for Australian 90CL beef in April, and continue close to that. A year earlier, that price was US131c/lb – a US47c/lb price rise.
“That’s in US dollar terms, but when it is converted back into Australian currency, it tells an entirely different story.
“The market in April 2009 was putting A190c/lb back into the pocket of the Australian exporter. A year later, in April this year the US178c/lb all-time
high price converts into A190.5c/lb.
“So what appears on paper to be an incredible record price increase, is in fact completely lost when the currency value is applied.”
The message from all this was that there was no bonanza waiting in the present US market for Australian grinding meat suppliers.
“By the time the Australian exporter converts the current record prices in the US back into Aussie dollars, they are getting offered the same or better money out of Indonesia, Russia or elsewhere.”
But the sheer size of the US market meant it would remain of fundamental importance to Australian grinding meat exporters for a long time to come.
“When there’s a big killing week on in Queensland, the US remains vitally important to the Australian industry, because of its ability to soak up large volumes of product. And the day will come when the dollar does ease again, and the US will reassert itself as the key grinding meat market.”
In light of the imported supply shortage, US grinding beef customers were turning more to domestic supply, Mr Hansen said.
While the US cow liquidation of last year was expected to slow during 2010, the cow kill had continued, and might be increasing.
“US cow kill in the year to date is now running 11pc above 2009.
“Some analysts are now saying 2010 will be the second-highest year ever for heifer placement in feedlots, suggesting the US cow herd could fall below 31 million for the first time since 1963.”
In Australia, the National Livestock Reporting Service reports medium cow prices peaked near 300c/kg in late September, and continue about 20c/kg up on last year’s values.
