By Angus Brown | Source: MLA, ABS, Mecardo.
On Tuesday we saw that Australian beef exports are continuing to track along at levels stronger than last year. In theory, more beef being exported should see the unit value of beef declining. This doesn’t seem to be the case, at least for the year to June.
In May, the big jump in total beef export values was due to a big jump in exports. Beef exports pumped $800 million into beef industry coffers. It was the largest monthly export value since September 2015, outstripping the average of the last two years by more than $100 million.
In June, export values maintained their strong levels but slipped under the $800 million mark. There was, however, a rise in the unit value of exports, with export volumes falling markedly.
For the year to June, beef exports were up 13%, but beef export values were up 15%. In the first half of the year, we have sold more beef, but the unit value of the beef has been stronger previously.
Figure 2 shows the monthly value of beef exports, divided by total exports. This gives us a price in ¢/kg for which beef is being exported.
We can see that since the start of 2015 export beef has been consistently valued above 700¢/kg swt. Prior to December 2014 beef exports had never been priced above 600¢, so it has been a big shift in demand.
In Figure 2 we’ve also charted the 90CL Frozen Cow price. The 90CL price is an indicator of the price of one of our biggest export categories, and it’s good to see that total export values have maintained at their 700+ level, despite the 90CL falling back under 600¢. This points toward higher-value beef demand strengthening.
Looking at recent export values we can see that the 785¢/kg posted in June was the fifth highest level on record. This was despite drought-induced heavy slaughter rates and export supply 6% higher than the previous June.
Key points
* Beef export values rallied strongly in May and maintained strong levels in June.
* The unit value of beef exports has remained very strong despite stronger supply.
* Strong beef export markets are helping prop up finished cattle prices, along with cow values during the drought.
What does this mean?
Beef exporters have managed to maintain strong export prices despite stronger supply. This is a good effort and is no doubt assisted by increasing demand from China, which as noted in Tuesday’s article, is soaking up plenty of the extra supply.
Strong export values have in turn helped prop up prices of Heavy Slaughter cattle and even cull cows. During the last drought, Cow prices spent a lot of time around 250¢/kg cwt. This time the low has been 36% higher, at 345¢/kg cwt.
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