How Australian beef prices might respond to global competitors’ plight

The Australian cattle industry’s failing fortunes are set to turn as some of the world’s beef export competitors face major headwinds.

The Australian cattle industry’s failing fortunes are set to turn as some of the world’s beef export competitors face major headwinds.

A confirmed case of bovine spongiform encephalopathy in Brazil last week combined with the lowest cattle herd in the United States since 1962 point to a prospective lift in prices for Aussie producers.

But analysts warn market signals could be slow to flow back to local producers who have seen big drops in returns across prime and store markets this year.

Any rise would be welcome news for producers who have watched the benchmark Eastern Young Cattle Indicator dive from a high of 1131c/kg a year ago to close on Monday at 719c/kg – 36 per cent lower than this time last year.

It is also down on the five-year average figure of 751c/kg.

Meat and Livestock Australia market analyst Tim Jackson said the last case of BSE detected in Brazil was in September 2021, which lead to a four-month suspension of exports.

“This did not have an appreciable impact on Australian beef prices as Australian exports to China were limited, and most Australian beef is exported to markets that Brazil does not have market access to,” Mr Jackson said.

”Depending on the length of the import ban, some of Brazil’s beef is likely to be exported to countries without export controls on BSE, but some is likely to be redirected to the domestic market, which has seen domestic consumption steadily fall as exports to China grow.

“As that beef will effectively be taken out of the global trade, this import ban may result in a drop in global supply, depending on how long imports are restricted.”

Major southern Australian producer Tim Roberts-Thompson, who runs cattle across Victoria and Tasmania, said any upside from the BSE case in Brazil would depend on how China viewed the situation now and over the next few months.

Brazil is the largest beef exporter in the world with 62 per cent going to China in 2022. Brazil immediately suspended exports to China when the case was confirmed last week.

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And while Mr Roberts-Thompson said the BSE case in Brazil could affect the Australian market, he said the ongoing drought in the United States and the fallout from this could have a bigger impact on Australian prices.

Not only did the dwindling herd mean potentially lower exports from the US, but the smaller amount of US beef available for its own domestic consumption could open up room for more Australian product.

“A lot of cattle have been sold in the US and I believe they are starting to get rain over there,” Mr Roberts-Thompson said.

“As soon as it does rebuild, the US cattle producers will need to go into a herd rebuild and Australia may be able to supply more beef, particularly the 90CL (grinding beef) to top up.

“We have an Australian dollar that is at an attractive level and the only thing I could see holding back any lift in price is the numbers going into processors are still high.

“We would need to see that higher throughput get through the system before we see any impact on prices.”

Fellow producer Stephen Branson from Mortlake was optimistic Australia might fill some of the shortfall in China after Brazil stopped exports in the wake of the BSE case.

“My gut feeling is where is that beef going to come from to fill that hole (of Brazilian beef to China,” Mr Branson said.

“China has a good consumption of beef that has grown rapidly so it has got to come from somewhere and it could create opportunities for Australian beef.”

Victorian Farmers Federation livestock group president Scott Young said no producer would wish misfortune on another country but there could be an upside for Australia.

“There are a lot of variables including how long Brazil suspends trade, but we know we have a great product (beef) in Australia,” Mr Young said.

“If the opportunity came to step in and fill the void, you would like to think Australia could do that with its reputation for clean, green sustainably produced beef.”

Mr Young said while “no one has a crystal ball”, there could even be positive spin-offs for other red meat products like lamb and mutton as China looked to fill its protein requirements created by the Brazil beef shortfall.

The BSE case in Brazil could also have positive impacts for other Australian export destinations, including the US, as it questions the broader issue of the food safety of Brazilian beef and that country’s transparency in dealing with diseases.

The US is the second biggest export destination for beef from Brazil.

Legislation to suspend Brazilian beef imports to the United States was put forward by two senators to the US government last week with the bill referred to the committee on Agriculture, Nutrition, and Forestry.

In supporting the bill, US Cattlemen’s Association vice-president Whitney Klasna said Brazil was “a bad actor in the global marketplace”.

“Several countries, including China, banned the Brazilian beef last year following animal and human health scares in the country,” Ms Klasna said.

“It is outrageous that we continue to accept the importation of beef from a country that is not interested in upholding the high standards and quality of the US cattle and beef industries.”