How Big Macs in Japan affect the feeder steer game

It's a critical development for the feeder steer business, in particular demand for animals to go into 100-day grainfed programs.

Australian beef exports to Japan last year were 206,802 tonnes shipped weight, down 3.7 per cent on the previous year.

Mr Quilty has been warning that without improved global demand, the price improvement seen in cattle and sheep markets so far this year will likely run out of steam.

No analysts are forecasting a big drop in the market this year but Mr Quilty says the upward trend will certainly dissipate without a change in the global scene.

He has actually flagged the possibility of record prices in 2026 and 2027 if global demand does improve.

Mr Quilty reports Western Australia has become the cheapest state in Australia to buy feeder steers, with prices almost 90 cents a kilogram cheaper than in Queensland at the moment.

This was due to a combination of both drier conditions and the limited space for kill capacity, he said.

But underpinning the fortunes of that part of the cattle business is the need for Japan to improve its pricing through 2024 - and there are few emerging signs of optimism in that regard.

Mr Quilty is credited with pioneering Australia's chilled meat exports to Japan as a meat trader out of Victoria earlier in his career.

He said tightening United States supply, improved full-service restaurant trade demand and a strengthening yen were all helping at the moment.

There is reason for "cautious optimism", he says, but adds that Japan's domestic economy still needs to improve to get consumer spending back on track.

"If Australia is to see sustained improvement in feeder steer prices throughout 2024 and beyond, Japan's economy needs to be firing on all fronts - this is not the case yet," he said.

Australia is, however, already filling the void left by lower US beef exports.

This trend is expected to continue and become even more significant in 2024 as US supply tightens.

Mr Quilty said Australia would likely surpass the US this year to become the third largest global beef exporter behind Brazil and India.

There were signs that Japan's imported beef market had bottomed, with recent data showing price improvement, he said.

Japan's government upgraded its view on business sentiment for the first time in two months in December as a central bank survey showed a broad recovery in the corporate mood thanks to upbeat profits, Global AgriTrends reported.

"Business mood and corporate profits are improving but these have not spilled over to domestic demand, such as consumption and investment, to raise the overall economic view," Mr Quilty said.

"Last year, the Japanese operator of McDonald's restaurants raised prices at 184 Tokyo city branches to help absorb higher rents and labour costs. This is the third price increase since March 2022, which made the delivery price of a Big Mac rise."

That demonstrated the challenges of Japan's quick service restaurant trade at the moment, with inflationary pressures and economic uncertainty stifling consumer spending.

"Let's hope Japan's improved business mood and corporate profits trickle down to consumers by mid-2024 with increased demand, thereby underpinning Australia's 100-day grain fed market," Mr Quilty said.