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Agricultural News

Peel Finds Imports of Australian Beef into U.S. Should Moderate in Coming Months

Tue, 06 Oct 2015 11:21:34 CDT

Peel Finds Imports of Australian Beef into U.S. Should Moderate in Coming Months Derrell S. Peel, Oklahoma State University Extension Livestock Marketing Specialist, writes in the latest Cow/Calf Corner newsletter.

U.S. beef imports were up 32.5 percent in the first seven months of 2015. This follows a beef import increase of 31 percent year over year in 2014. The 2014 beef import total was the highest level since 2007 and, at the current pace, total 2015 beef imports could be a new record high. The increase in beef imports was expected and is the result of several factors including: record high U.S. beef prices; declining U.S. beef production (especially relative shortages of processing beef); and a strong dollar making imports even more attractive. However, changes in the U.S. market and in countries that export beef to the U.S. suggest that beef imports will likely moderate in late 2015 and into 2016.

A significant part of the jump in U.S. beef imports in 2014 and 2015 has been from Australia. A unique combination of the U.S. market circumstances described above and the situation in Australia created the ideal conditions for a dramatic increase in beef imports from Down Under. Australia has been severely impacted by drought across much of the country, including the major cattle production regions, since 2012. This has resulted in increased cattle slaughter and beef production; increased cattle exports; and increased beef exports. Australian cattle slaughter in 2014 was 9.91 million head, the highest level in more than 35 years. Live cattle exports (mostly to Indonesia, Vietnam and China) were another 1.3 million head, an all-time record level. Both beef production and exports were also at new record high levels in 2014. This level of production is not sustainable and 2016 cattle numbers in Australia are projected to be 26.3 million head, down over 10 percent from 2014 levels. If realized, this 2016 cattle inventory would be the smallest since 1995. Reductions in the cattle herd mean that production will moderate and indeed, cattle slaughter and exports, along with beef production and exports are all expected to decrease somewhat in 2015 and again in 2016. When forage conditions improve, herd rebuilding will further squeeze Australian beef production and exports at some point in the future.

The combination of U.S. and Australian market conditions resulted in U.S. imports of Australian beef increasing 74 percent in 2014, accounting for 66 percent of year over year increase in total U.S. beef imports. Imports of Australian beef are up another 55 percent for the year to date through August of 2016, accounting for 53 percent of the year over year increase so far this year. The U.S. surpassed Japan as the largest Australian beef export market in 2014 with the U.S. accounting for 30 percent of Australian beef exports in 2014.   This pattern is continuing in 2015.

However, there are several reasons to expect U.S. imports of Australian beef to moderate in late 2015 and into 2016. As noted above, the decline in cattle numbers means that total Australian beef production and exports will decline modestly in 2015, from 2014 peaks, and will decrease further in 2016. There are indications of some improvement in forage conditions in parts of Australia that may stabilize herd liquidation; though significant herd expansion does not seem imminent. Simultaneously U.S. beef production will begin to expand and U.S. beef prices will moderate somewhat in 2016. However, the strong U.S. dollar (specifically against the Australian dollar) will continue to support U.S. imports of Australian beef. One final factor for the remainder of 2015, Australia is likely to hit the U.S. beef import quota before the end of the year, thus curtailing imports somewhat. Any imports above the quota will be subject to a 21 percent tariff.


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