What might the US-Japan trade deal mean?

US-Japan trade deal: how much will it hurt us?

Opinion
Aa

In the short term, reduced US tariffs, our lower supply and our strong domestic prices, will make it hard to maintain market share in Japan.

Aa

A lot of numbers are being bandied about with the US-Japan trade deal being signed, as well as the possibility of hormone growth promotant restrictions on US beef into China possibly being lifted.

But what does all this mean in the context of what we can supply, and the effect on market share and prices?

Firstly, we probably need to clarify what the tariff changes for US beef into Japan entail.

Australia currently provides about 48 per cent of Japan's beef and the US supplies about 40pc.

Australia and the US are the two main players in this space and until the agreement between the US and Japan was struck, we were sitting much prettier with a tariff on beef imports of about 26.6pc compared to the US's 38.5pc (also see "Japan beef market set to hunger for US cuts", p19).

The US's market share will no doubt accelerate as its product becomes more price competitive, but, given Japan is a key market for Australia, is all this as scary as it sounds?

Rural Bank analyst Michael Curtis said Australia has been losing market share in Japan ever since the US regained entry in 2013 after its mad cow disease scare.

Japan is a high value market for our beef, but we have a lot of markets thanks to investment in developing solid market diversity, and our clean, green reputation means we have a good base, and many of our other markets have more potential for extra supply.

Related reading:US Japan trade deal levels beef playing field

In the short term, reduced US tariffs, our lower supply and our strong domestic prices, will make it hard to maintain market share in Japan.

The effect at a farm gate level could be delayed due to our drought-reduced herd as the market waits for numbers to come back online.

But as a relatively small player in the scheme of things, a big percentage increase in our production should still be able to find a home at a reasonable price given overall increases in global demand for red meat.

This is particularly the case for China, which has recently jumped past Japan to the number one destination for Australian beef, with shipments jumping by 65pc in the past year.

Despite political tensions making people wary in this space, the growth here in the short term should certainly help to off-set market share decline in Japan, particularly at a time when our national herd is in decline.

Aa

From the front page

Sponsored by