Beef shipments to China fall back

The key area analysts are keeping an eye on is China. Shipments eased sharply for the second month in a row. At 12,500 tonnes shipping weight, they are back to half what was sent in July last year and down 26pc from June.

Some of that can be attributed to the suspension of four Australian abattoirs from servicing China on technical grounds and the triggering of a volume safeguard which sees our product attract a higher tariff.

However, exporters would likely have some butterflies about whether it's the tip of the iceberg in terms of the effects of global recession.

Manager of commodity market insights at Thomas Elder Markets Matt Dalgleish said while it wasn't alarm bell ringing time yet, Australia's beef industry would be watching anxiously to see if the subdued Chinese demand looked like developing into a longer-term trend.

"Is the drop-off to do with slowing economies - if the Chinese are noticing a slowdown in their own exports on the back of the current broader economic perspective, it may be flowing through to less demand for our beef," Mr Dalgleish said.

"We know changes to GDP (gross domestic product) do have an impact on global beef demand - so we need to be conscious of that going forward."

Mr Dalgleish did point out the decreased trade with China comes off higher historic volumes, meaning the latest figures are only 15pc under the five-year average trend for July.

Total beef exports for July, according to the Department of Agriculture, Water and Environment, totalled 88,786t swt.

Meat & Livestock Australia's On the Ground podcast reported the slimmer volumes to key markets was largely influenced by reduced Australian production, increased competition and a strengthening Australian dollar.

MLA analysts believe the export results reflect enduring international demand for safe, quality beef.

Volumes to the United States were on par with 2019, with reduced demand for frozen grassfed offset by increased buying of chilled grassfed, they reported.

Japanese and Korean buying was back 24 and 14pc respectively.

Rural Bank's August insights update says from here, Australia beef could be challenged by the recovery of beef production in the US, where supply would remain elevated for the remainder of 2020.

The rising dollar would also affect the competitiveness of Australian beef, which was already at relatively high prices compared to international competitors, Rural Bank said.

In an aside, MLA's podcast also reported US meat substitute company Beyond Meat has announced it was entering Brazil as part of its wider expansion strategy.

Brazil is one of the largest per capita consumers of beef.

MLA analysts said given the weak economic climate in Brazil on the back of COVID, the expectation was for limited demand for the product.

Marty Smith, from the National Cattlemen's Beef Association in the US, told an Australian webinar audience last week panic buying during the global health pandemic had meant "we are able to see a lot better how we really do compare to the fake meat we've been concerned about."

He showed images of US grocery store shelves devoid of fresh red meat but laden with Beyond Beef products.

THE shift to greater home consumption that has delivered a boon to food retailers appears to be settling into a 'new normal' where red meat is concerned.

Meat & Livestock Australia's national customer development manager Scott Cameron said the latest beef retail numbers showed that although there had been a softening from April and May, spending in the period until mid July was still ahead of last year.

That was driven by two key factors - an increase in households purchasing beef (an additional 300,000 households bought into the category in the latest period) and an increase in spend among existing buyers, Mr Cameron told the On the Ground podcast.

Beef cuts which grew most over June and July were steaks, t bones scotch fillet, rump, pre-marinated packs and roasts.

What would consumers look for if restrictions ramped up?

"In Victoria, we've already seen panic buying and from a supply chain point of view, hand-to-mouth stock replenishment for a lot of retailers," Mr Cameron said.

"It's mince that is the big ticket item and some retailers have already put quantity limitations on."

Interestingly, premium steaks have also been in hot demand.

"People are looking to replicate the juicy pub meal rib eye at home on the backyard barbecue," Mr Cameron said.

Overall, the biggest beef purchase drivers as Australia moves further into recession will likely continue to be freshness of product and perceived value and price.

"However, recent consumer tracking surveys show there are a couple of new areas of interest - place of origin and animal welfare are becoming higher order in terms of purchase drivers," Mr Cameron said.

"So callouts on pack that speak to a farm-to-plate story could be something that positively impacts purchase decisions."

Meanwhile, the online channel has grown at 43 per cent for the past 12 months, with chilled meat and poultry the number one category contributing to that growth.

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