Australian beef exports woes continue, but the outlook looks brighter toward the end of the year

According to Australian Department of Agriculture data, Australian beef and veal exports during the first four months of the year declined by 12% YoY to 239 kmt, the lowest volume for this period in decades. Australian beef exports have been subdued due to the ongoing herd rebuilding process that started in 2021, after the country experienced a severe bout of drought during 2017-2020. The situation was aggravated due to labor shortages caused by the pandemic, as temporary workers started to leave and those who remained came down with Covid-19 in early 2022. Moreover, a series of floods earlier in 2022 caused disruptions in production, reflecting on the lower numbers of the Jan-Apr 2022 period. Entering May, floods have continued hampering the beef supply chain.

Nonetheless, the outlook for exports looks brighter as the year advances. Cattle slaughter, and therefore, exports, are expected to return to 2019-2020 levels by the end of this year.

The most recent data from the Australian Bureau of Statistics showed that cattle slaughter continued its YoY decline in Q1 2022, but the fall in this period was by the slowest pace in two years. And, while slaughter numbers reported by Meat and Livestock Australia (MLA) entering May were still behind those seen in 2021 figures, the number is expected to increase overall in 2022 by 4% YoY, as the herd rebuilding progresses and above average rainfall continues. According to Tridge representative in Australia, Sean Flanery, farmers actually have “lots” of cattle right now, but most of it is not yet ready to be slaughtered, as farmers are waiting for the cattle to reach heavier weights. By the end of the year, slaughter numbers could return to 2019-2020 levels and exports should follow accordingly.

               Source: Tridge, with ABS data

Moreover, entering May, the AUD/USD has been trading at $0.69-$0.70, which will support beef exports in the upcoming months. Market sentiment toward the Australian dollar seems more bearish as of late.

               Source: Tridge, with ABS and Macrotrends data

According to World Bank data, Australian beef prices are still trading near record highs, averaging $6.13 per kg in April 2022, slightly lower than the record price in March of $6.25 per kg. Australian beef prices have grown in tandem with global beef prices, and are still expected to remain supported in the upcoming months on the back of multi-year high input prices and ongoing logistical disruptions. World demand for beef is still going strong and expected to increase in the upcoming years.