MLA GLOBAL SNAPSHOT Beef January 2019 1

GLOBAL SNAPSHOT l BEEFThis report offers a comprehensive overview of the global beef industry and Australia’s trade relationship with the world.

The outlook for global beef consumption is positive, largely underpinned by growth in population and household wealth in developing markets, particularly Asia. Australia produces only 3% of global beef production, but accounts for around 17% of world trade and has remained one of the top-three largest exporters for over seven decades. While Australian beef faces a number of headwinds, particularly around remaining price competitive, there are many opportunities for targeted growth.Australian beef globally is facing a range of opportunities and challenges:• Growing household incomes are providing many consumers

the ability to increase protein consumption, with those shifting into the middle-upper income brackets often seeking to improve the quality of meat they consume.

• In developed markets, consumers are seeking differentiated segments within the beef category – such as grassfed and grainfed product or certified breeds and raising claims. Australia’s diverse production system allows the industry to target a broad range of differentiated opportunities across markets.

• In many mature markets, growing consumer interest and awareness of provenance, sustainability, animal welfare, food safety and traceability provide messaging opportunities for Australian beef brands and underpin ambitious industry-wide programs for Australia to differentiate itself.

• The high price of beef, compared to competitor proteins such as chicken and pork, will continue to test growth and keep the category sensitive to economic conditions and consumer purchasing power. Furthermore, relative to major competitors, the high price of Australian cattle, compounded by additional costs along the supply chain, reinforces the need for Australia to focus on differentiating itself from competitors and providing a value proposition to consumers.

• Growing production and exports from key competitors, particularly the US and Brazil, will intensify competition in coming years, especially in Asian markets. For now, strong global demand, led by import growth in China, has soaked up additional beef on the global market but a slowdown would negatively affect farm gate cattle prices in Australia.

Global population Households earning* >US$35k/year Share of global exports

7.627in 2018

7.948in 2022

300.9in 2018

364.1in 2022

Brazil – 17% Australia – 17% India – 15% US – 12% Canada – 6% NZ – 5% EU – 5% Rest of world – 23%

in billionSource: BMI Research, 2018 estimate & 2022 forecast

in million householdsSource: BMI Research, 2018 estimate & 2022 forecast Source: OECD-FAO 2018 Agricultural Outlook 2018 estimate

Australian beef exports – volume Australian beef exports – value Australian beef exports – cuts

Chilled grass – 13% Chilled grain – 14% Frozen grass – 61% Frozen grain – 13%

Chilled – 39% Frozen – 61%

Manufacturing – 37% Brisket – 10% Blade – 6% Chuck roll – 6% Silverside/outside – 6% Topside/inside – 5% Shin/shank – 4% Others – 27%

Total 1,078,170 tonnes swtSource: DAWR 2017–18

Total A$7.96 billion FOBSource: ABS 2017–18 Source: DAWR 2017–18

Share of global beef production Global meat consumption – million tonnes cwt

US – 18% Brazil – 14% EU – 11% China – 11% India – 6% Argentina – 4% Australia – 3% Rest of world – 32%

Pork

120 125 123 130

Poultry Beef Sheepmeat

71 74

15 16

Source: USDA 2018 estimate 2018 2022

Source: OECD-FAO 2018 Agricultural Outlook

*includes: EU, Egypt, Bahrain, Iran, Jordan, Kuwait, Qatar, Saudi Arabia, UAE, US, Canada, Mexico, Japan, Korea, China, Australia, ASEAN, Taiwan and Hong Kong.

GLOBAL MARKETS STRATEGIES CONSULTATION #1

MLA GLOBAL SNAPSHOT Beef January 2019 2

GLOBAL CONSUMPTION Global beef consumption is forecast to grow at 1.2% per annum out to 2022 (FAO-OECD) supported by population and economic growth, with eight of Australia’s top 10 beef markets expecting gross domestic product growth over 2% in the coming year (IMF). However, beef’s share of global meat consumption, at 21.5%, is expected to decline slightly due to a faster expansion of the poultry sector.Beef consumption levels vary across the world but are often determined by a combination of factors, including:

• economic development and consumer purchasing power• population growth and demographics• dietary preferences associated with culture and religion• a history of local meat production and consumer familiarity• competition from other proteins and relative prices• trade policy and market access.Increasingly, however, consumption in developed markets is also guided by health perceptions, environmental considerations and animal raising practices.Global beef prices have been growing at a faster rate than both chicken and pork. In 2000, the global beef price was 2.8 times higher than chicken but, by 2017, this had increased to 3.2 times (FAO-OECD). This consistent rise in price, underpinned by substantial efficiency gains in the poultry and, to a lesser extent, pork industries, has limited the ability of beef to expand its share of consumption.Demand in many mature markets is shifting focus from quantity to quality, presenting both a challenge and opportunity for Australian beef. Starting from a lower per capita base, developing countries are forecast to account for 83% of additional world consumption over the next five years, largely due to population growth, urbanisation and increasing incomes.

CONSUMER LANDSCAPE Beef has a long history of consumption in many markets around the world and constitutes a major part of diets in some countries. Beef encompasses a wide range of products and can range from low value offal and manufacturing product through to high value Wagyu steaks, all of which play a unique role depending on the country and consumer segment.In many western countries, beef is considered the ‘prime’ meat in the sense it is viewed as the most superior and delicious, and is often a family favourite. However, the role of beef shifts in many Asian and Middle Eastern countries where proteins such as pork (in Asia), seafood, chicken and sheepmeat (Middle East) play a larger role in consumer diets.Given the diversity of Australian beef, understanding consumer needs and what drives purchasing decisions in each market is essential. MLA conducts a global consumer survey annually across Australia’s major export markets to do just this.

For a detailed of overview of Australia’s primary beef markets, visit:

https://www.mla.com.au/market-snapshots

For Australia, targeting export markets that have the ability to purchase high quality beef is key, with household’s earning over US$35,000 one measure of the potential market size.

Beef consumption

millio

n to

nnes

cwe

0

5

10

15

20

25

30

Africa Latin America North America Europe OceaniaAsia

Mostly developing regions Mostly developed regions

2007 2017 2027 forecastSource: OECD-FAO 2018 Agricultural OutlookMiddle East and North Africa (MENA) split across Africa and Asia

Number of households earning over US$35,000

millio

n

0

20

40

60

80

100

US Japan Korea Indonesia SaudiArabia

AustraliaChina UAE VietnamUK

2017 estimate 2022 forecast Source: BMI

World meat price indices

Index

(200

2-20

04 =

100)

2004 2006 2008 2010 2012 2014 2016 201850

100

150

200

250

300

Beef Sheepmeat Pork Poultry

Source: FAO

Consumer perceptions of beef and competing proteins can vary significantly from market to market. However, there is some global commonality, particularly with respect to consumers seeking meat that is fresh, safe and enjoyed by the whole family. The economic development of a country influences typical consumer purchasing drivers, with developing countries focusing more on freshness and safety and developed markets on quality and points of difference.A number of trends around the world that favour both grassfed and grainfed beef – as well as other points of difference, such as breed and raising claims – provide Australia’s broad production system numerous opportunities to target growing segments.

MLA GLOBAL SNAPSHOT Beef January 2019 3

Broad global consumer trends affecting beef consumption through foodservice and retail channels include shifts towards:• more fresh and less processed offerings• customised meals• health claims such as ‘free from’ and ‘natural’• premiumisation• convenient, on-the-go offerings• provenance messaging• smaller, but higher quality, portions.The retail landscape around the world differs significantly across regions and countries. Developed markets, such as Australia and the US, have highly consolidated grocery retail networks that enables far easier supply chain integration and greater ability for Australian beef business to gain a broad, coordinated footing.In developing countries, like China and Indonesia, organised retail plays a minor role and the market is highly fragmented. Many traditional channels, such as wet markets, still play a key

role in the retail landscape, adding greater complexity when seeking high penetration of Australian boxed beef.

Share of organised retail

%

USJap

anKo

rea

Indon

esia

Taiwan

Australi

a

Singa

pore

China

KSA

VietnamUK

0

20

40

60

80

100

Organised retail Other Source: BMI

GLOBAL SUPPLY With the exception of the European Union (EU), all major beef exporters are forecast to increase production in coming years and competition for volume and value share in Australia’s export markets is expected to intensify. Australia is a relatively small player when it comes to beef production, accounting for about 3% of global supply, but is a major player when it comes to exports, particularly in providing high value product backed by integrity and quality assurance systems. The types of production systems and supply chains vary greatly across the world. Beef production in New Zealand (NZ), the EU and India is largely a by-product of the dairy industries but, at one extreme, NZ is almost entirely export focused, while the EU is domestic oriented. Meanwhile, most producers in North America and South America rely on beef cattle genetics, but the former primarily finishes bos taurus cattle on grain and the latter a mix of bos taurus and bos indicus cattle on grass. With bos taurus genetics, traceability systems and an export focus, Uruguay reflects the industry makeup of Australia; however, it remains a much smaller competitor in global markets and produces predominantly grassfed beef. Production powerhouses – the US, Brazil and China – are dominated by beef cattle genetics but remain focused on their domestic markets. The US, with a substantial domestic feedgrain supply, large herd and consolidated feedlot industry, is the world leader in beef production. US carcase weights are the heaviest of all major producers and impressive economies of scale allow it to compete strongly with other global producers where land, labour and

cattle are substantially cheaper. South America lags the efficiency of the US in producing beef but it has been catching up as their industries, particularly Brazil, adopt new practices and technologies. Forecast beef production growth in 2019, particularly in the US (3.6%), will place pressure on Australia’s high value export markets, while growth in Brazil (3.0%) and India (0.7%) will compete with Australian manufacturing beef and live cattle exports in China, South-East Asia and Middle East & North Africa. While production trends paint part of the picture, market access changes, namely for Brazil and India, could have a far greater competitive impact on the Australian beef in some markets.

Global carcase weights

aver

age

carc

ase

wei

ght (

kg/h

ead)

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

North America

South America

EU

Australia

Asia

50

100

150

200

250

300

350

400

US Canada EU Australia Brazil Uruguay Argentina China India

Source: USDA

Production mix

Beef

cattle

% o

f cow

her

d

0 20 40 60 80 1000

20

40

60

80

100

Export % share of production

Argentina

Canada

UruguayAustralia

NZ

Mexico

China

Russia

Brazil

US

EU

India

Source: USDABubble size reflects 2017 production and colours reflect region

MLA GLOBAL SNAPSHOT Beef January 2019 4

AustraliaDriven by volatile seasonal conditions, the Australian cattle herd has gone through a period of significant change over the last eight years, expanding to a three-decade high in 2013 and subsequently contracting to a two-decade low. This has had flow-on effects for the quantity and quality of beef coming through the supply chain. Dry conditions in 2018 pushed increased volumes of breeding females onto the market as producers destocked. However, after a decade of droughts, the feedlot sector has continued to expand into record territory in 2018, allowing the industry to mitigate extended dry periods and consistently produce high quality beef.

For the latest detailed outlook on Australian beef supply, visit:

mla.com.au/cattleprojections

United StatesThe US is the world’s largest beef producer and has significantly ramped up production and exports in the last two years, targeting traditional Australian export strongholds such as Japan and Korea. The US can produce high quality beef, with grainfed cattle of bos taurus genetics making up the majority of production and developed cold chain infrastructure giving it the ability to export chilled product. In high value markets, particularly North Asia, the US poses the greatest competition to Australian beef. The US cow herd expansion has begun to slow, driven by reduced cow-calf profitability and poor seasonal conditions in key cattle areas in 2018, which will moderate growth in feeder cattle supplies in coming years. US beef production growth, and the bearing it has had on global markets, is expected to ease by 2020.

Regional beef production growth (2007–2027f)

millio

n to

nnes

cwt

North America

Europe

Oceania

Africa

Latin America

Asia

2007 f2027

2017

0

5

10

15

20

25

30

Source: FAO-OECD 2018 Outlook

BrazilBrazilian beef production is expected to continue to grow in coming years, underpinned by a slowly expanding herd, greater availability of slaughter cattle and strong international demand. Compared to Australia and the US, the Brazilian herd is far less productive, giving it greater ability to lift future production from efficiency gains as opposed to greater resource use. The Brazilian herd is predominantly bos indicus cattle, finished on pasture and destined for the commodity beef trade. However, there has been significant investment in improving genetics and finishing greater numbers on grain.

In recent years, market access and currency movements have had a far greater impact on Brazil’s presence in global markets than shifts in its domestic supply base. Brazil has increasingly focused on Asia and the Middle East for new opportunities and has begun competing more directly with Australia. However, after a temporary suspension, some Brazilian beef plants at the end of 2018 regained access to Russia, once its largest market, which may alleviate some competitive pressure on Asian markets.While a growing threat, Brazilian beef exports have been marred by recurring scandals, such as the ‘weak meat’ incident in 2017, and access to markets will remain limited by its sanitary and animal health status.

ArgentinaArgentina began liberalising its economy following the election of reforming President Macri in 2015. For beef, this included the removal of a 15% export tariff, export restrictions and currency controls overvaluing the peso. With the economy restructuring, inflation skyrocketed and the peso collapsed in 2018. While domestic pressures prompted the return of some export taxes, Argentine beef has become very competitive on the global market. After a period of herd and production growth, the supply expansion is expected to slow. However, with the domestic market in recession, strong global demand and a weak currency, Argentina is expected to remain a major competitor on the global market. Argentina produces a mix of low and high quality beef, with the herd predominantly bos taurus genetics and grainfed cattle accounting for close to a third of cattle turnoff.

Major beef suppliers expanding producton

millio

n to

nnes

cwt

US Brazil EU China India Argentina Australia

3.6%

3.0%

1.0%

0.7%

1.7%

-1.5%

0

2

4

6

8

10

12

14

2017 2018 estimate 2019 forecast

Source: USDA, MLA (Australia)% reflects 2019 year-on-year change

European UnionThe EU is a significant producer of beef, but most production is derived from a dairy-based herd and consumed domestically. The region is a high-cost producer of beef, remains heavily protected from the global market and is subsidised through the EU Common Agricultural Policy. Nevertheless, in 2017, beef production was an estimated 7.89 million tonnes carcase weight (cwt) – almost four times that of Australia. France holds the position as the largest beef producer in the region, accounting for 18% of EU production in 2017, followed by Germany (14%) and the UK (11%).While there was a short-term production recovery in 2016 and 2017 due to a milk price induced liquidation of the dairy herd, EU beef production is expected to continue its gradual decline, in line with a falling herd and reduced local demand.

ChinaSmall-scale producers and abattoirs dominate beef production in China and, while a significant global beef producer, growth remains limited by resource constraints. An inability to expand local production (official government statistics for the last decade were revised lower in 2018 to reflect flat growth) has led to a

MLA GLOBAL SNAPSHOT Beef January 2019 5

surge in imports in recent years (see China section below). China’s domestic beef production shortfall is expected to continue expanding over the next five years. However, short term fluctuations in local production – which still accounts for over 90% of consumption – can have significant impacts on import requirements.

IndiaIndian buffalo meat (IBM) is a commodity product and sets the world price floor. IBM is a by-product of the large but smallholder-based Indian dairy industry. India does not have foot and mouth disease-free status, restricting access to many countries, and it predominantly exports to developing and price sensitive markets.

IBM production expanded rapidly throughout the 2000s, as the dairy sector grew and buffalo began being utilised for meat, but has slowed more recently. While a massive industry, IBM remains sensitive to domestic politics, with some Hindu groups calling for its outright ban. The industry came close to closure in 2017 when the Supreme Court overruled a ban by the Modi government on the sale of cattle and buffalo for slaughter. Over half of IBM production is consumed domestically, predominantly by India’s Christian and Muslim population.

Virtually all exported IBM is shipped as a boneless frozen product, with little differentiation between cuts. Vietnam is the largest market, but significant volumes are reportedly re-exported to China. Other major markets are across the Middle East and South-East Asia where it is positioned as an affordable protein.

Cost of productionAlready a high-cost producer, the lift in the Australian cattle market over the last four years has made competing in the export market increasingly challenging, despite a softer Australia dollar.

While one of the most efficient countries to breed and grow out calves – largely due to high levels of broadacre labour efficiency and economies of scale – Australia is less competitive in finishing cattle relative to other major producers – the result of high store cattle, land, labour, regulatory and feed costs. High on-farm costs are compounded by additional expenses in the supply chain, particularly in processing cattle, where Australia costs twice that of Brazil and 24% more than the US (AMPC).

Global cattle prices

A¢/kg

live

wei

ght

2011 2012 2013 2014 2015 2016 2017 2018100

150

200

250

300

350

400

450

500

US Australia Uruguay Brazil Argentina

Source: IPCVA (Argentina); MLA’s NLRS (Australia); Esalq/Cepea (Brazil); INAC (Uruguay); USDA/Steiner Consulting Group (US). Finished cattle (steer) specifications vary between indicators.

Prior to 2015, Australian cattle prices closely tracked South America on a currency adjusted basis, but the separation in markets following the 2014–15 drought has not reversed, partly due to relatively tight supplies of slaughter cattle in Australia and the Brazilian real and Argentine peso coming under significant downward pressure in recent years.

In addition, the discount of Australian cattle to the US narrowed in 2018. From 2009 to 2012, the Australian saleyard Heavy Steer averaged a 26% discount to the US Choice Steer. This discount blew out to 42% during 2013–2015, but has since contracted to average 19% in 2018 and finished the year at 14%. A narrowing cattle price spread between the US and Australia highlights the competitive pressure Australian beef faces in key export markets.

While elevated prices are positive for Australian producers, when compounded by high slaughter and supply chain costs – for instance, 70% Australian beef is consumed are overseas, while the majority of US beef is consumed within North America – Australia must continue to focus on improving efficiency andincreasing the value proposition for consumers.

Cattle slaughter costs* On-farm cost of finishing cattle**

US¢/

kg

A$/h

ead

Australia US Brazil Argentina Australia US Brazil Argentina0

50

100

150

200

250

300

350

400

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

200

400

600

800

1000

Labour Utilities  Certification Other A$/kg cwt (RHS)

Maximum Average Minimum

Source: *AMPC (Analysis of regulatory and related costs in red meat processing) 2015-16 typical operating slaughter costs and excludes cost of cattle. **agri benchmark 2017 typical farm/feedlot cost of finishing cattle, includes the cost of store cattle.

For more information on Australia’s comparative cost of production, visit:

ampc.com.au/2018/10/Analysis-of-Regulatory-and-Related-Costs-in-Red-Meat-Processing

mla.com.au/prices-markets/Trends-analysis/agribenchmark/

MLA GLOBAL SNAPSHOT Beef January 2019 6

TRADE The bulk of beef consumption growth over the past decade, and forecast over the next, has been in the developing world, particularly Asia. However, surplus production remains centred in North and South America and Australasia. These production and consumption imbalances drive global trade. In addition, reduced tariffs and sea freight costs, improved cold chains and the development of governing institutions have supported the growth of the global beef trade over the past two decades.

Australian beef exports

‘000

tonn

es cw

t

USJapan

Korea

China

Indonesia

MENA

Other

SEA(exc. Indonesia)

0

100

200

300

400

500

20002018

2015

2011

Source: DAWRExports are for year ending June (2000–2018)

In 2018, a record 17% of beef production was traded internationally – higher than poultry, pork and sheepmeat. Exporting over 70% of beef production, Australia – far more than most but comparable to NZ and Uruguay – is heavily exposed to currency fluctuations, the health of the global economy and market access changes.

Global share of production exported

shar

e of

pro

duct

ion

expo

rted

(%)

0

5

10

15

20

1960

1963

1966

1969

1972

1975

1978

1981

1984

1987

1990

1993

1996

1999

2002

2005

2008 20

11

2014

2017

Source: USDA, MLA calculations

Competitive landscapeThe competitive landscape has evolved over the decades. While volumes are ten-fold what they were in the 1960s, Australia has maintained an important role over the years and remained within the top three biggest exporters.

Competition in Australia’s major export markets

mar

ket s

hare

(%)

0

20

40

60

80

100

USJap

anKo

rea

Canad

aTai

wan EUChin

a

Philip

pines

Indon

esia

Malaysi

a

Imported beef market

Australia Canada US Mexico NZ Uruguay Brazil Argentina India Other

Source: GTA

The US has been Australia’s primary export competitor over the last two decades, while Brazil has emerged more recently under improved access and increasing volume. While India is an exporting powerhouse, it purely supplies the commodity market and competes more directly with chicken and pork than beef.

A lot of beef trade remains regional (and within regional trading blocs); for instance, cross-border trade within South America (Mercosur), North America (USMCA) and Europe (EU). Once regional trade is ignored, Australia is the world’s largest exporter of beef.

The US is Australia’s single largest export competitor due to its access to high-value markets, large scale and exportable surplus, and ability to supply high quality chilled product. Other exporters – such as NZ and Canada compete in similar segments to Australia but remain limited by supply to expand exports. Brazil and Argentina have a large supply base and have expanded into Asia in recent years, particularly China, but are hindered by market access and are yet to supply substantial chilled volume outside of South America.

Beef trade growth over time

millio

n to

nnes

cwe

0

2

4

6

8

10

12

14

16

1960

1961

1962

1963

1964

1965

1966

1967

1968

1969

1970

1971

1972

1973

1974

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

Creation of WTO

Brazil India Australia US Other Source: USDA

MLA GLOBAL SNAPSHOT Beef January 2019 7

China’s ascent to importing powerhouseChina’s influence on the global beef trade in the last decade cannot be overstated. It has transformed from minor import market to now rivalling the US for the top spot. Australia has been one beneficiary to this ascent but has since been joined by Brazil, Uruguay and Argentina.

More recently, concerns regarding the impact of African Swine Fever may lead to additional import demand – more likely for pork and chicken but beef will also find support. However, to date, beef demand growth has been underpinned by a sustained period of economic expansion. With China caught up in a trade war with the US and its economy showing some jitters, there are risks with being too exposed to the market – which is the case for most South American exporters. A slow-down in demand from China would directly dampen demand for Australian exports and indirectly increase competition elsewhere, if other major exporters were to redirect beef to other markets.

Top three imported beef markets

‘000

tonn

es sw

t

USGreater China Japan0

300

600

900

1200

1500

Hong Kong

China

Source: GTA. Volumes are year ending October 2018.

Market accessTrade is central to the ongoing viability of the Australian beef industry, and pursuing unrestrained entry to global customers remains critical. Australia’s access to export markets has generally improved over the past three decades, led initially by multilateral negotiations through the World Trade Organization, and more recently, through a series of bilateral and regional free trade agreements (FTAs). Reductions in non-tariff barriers have also been advantageous; however, many remain and have a noticeable impact on the cost of doing business.

Australia has some of the best beef access globally due to trade reform initiatives and Australia’s animal health status underpinned by a suite of industry integrity systems. Australia has FTAs with most major beef import markets including the US, Japan, Korea and China – which represented 74% of Australian beef and beef offal exports in 2017-18 – while the EU and Russia remain exceptions.

In addition, the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP or TPP-11) has been ratified, providing improved access to Japan, Canada and Mexico from the commencement of 2019, while negotiations for the Regional Comprehensive Economic Partnership (RCEP) – a multilateral agreement between ASEAN nations and China, India, Australia, New Zealand and Korea – are ongoing. FTA negotiations with EU began mid-2018 and the Australian government has signalled a desire to engage the UK in trade talks as soon as it is in a position to do so following ‘Brexit’.

Recent political shifts have meant trade liberalisation, and securing additional benefits for Australian beef, has become increasingly challenging. The increase in protectionism, led by the US approach to trade, does pose some risk but Australian beef exports have largely avoided any blowback from the unfolding US-China trade war.

Australia’s access to global markets is underpinned by strong animal health credentials, having never had a case of foot and mouth disease or bovine spongiform encephalopathy, and world-leading animal traceability and food safety systems.

Live exportAustralia is a leading exporter of live cattle globally. The trade links Australian cattle producers to supply chains in South-East Asia and the Middle East. Broadacre pastoral production in northern Australia is very efficient at raising calves but less so at finishing cattle. Close by in South-East Asia, notably Indonesia, are feedlots utilising by-products from palm oil and other crops and consumers who prefer a freshly slaughtered animal. Lack of cold chain infrastructure and the dominance of wet markets also supports the need for freshly slaughtered cattle. While these synergies allow Australia to be the leading, if not sole, supplier of cattle to many countries, the high cost of Australian cattle presents a signification challenge in often price-sensitive markets.

Evolution of China beef imports

‘000

tonn

es sw

t

2014 2015 2016 2017 2018

Australia, NZ and Uruguay areprincipal suppliers

Brazil gains access andgrows market share

Argentina reform agendaand removes exports tax on beef

African Swine fever discovered in China

0

20

40

60

80

100

120

Australia NZ Uruguay Argentina Brazil Canada Other Source: China Customs

MLA GLOBAL SNAPSHOT Beef January 2019 8

Major live export trade flows also exist across North America, primarily composed of feeder cattle from Mexico and Canada destined for US feedlots, as well as finished cattle from Canada heading straight to US abattoirs. While Mexico exports over one million cattle a year to the US, the synergies and sea-freight infrastructure is not in place to ship large quantities to South-East Asia.

Brazil, another major exporter of cattle, previously focused shipments within South America however, in 2016 and 2017, exports shifted to the Middle East, primarily Turkey. While discussions to export cattle from Brazil to some South-East Asian markets, namely Indonesia, are ongoing its foot and mouth disease status hinders access.

Major live cattle exporters

‘000

hea

d

0

200

400

600

800

1,000

1,200

1,400

Australia Mexico BrazilUS Uruguay EUCanada

Trade to SEA & MENA

Trade withinNorth America Trade to MENA

Source: USDA, DAWR (Aust.) 2018

SUMMARY TABLE

Aus

tral

ia

NZ

US

Mex

ico

Can

ada

Bra

zil

Arg

entin

a

Uru

guay

Indi

a

Chi

na

EU

Cattle herd (million head)* 27.4 10.1 94.4 16.6 11.6 232.4 53.7 11.7 305 96.9 88.4

Dairy % of cow herd** 12% 85% 23% 31% 21% 42% 8% 7% 100% 21% 65%

Cattle and calf slaughter

(million head)*8.3 4.2 33.8 6.2 3.4 39.5 13 2.3 38.9 52.1 27.2

Cattle exports (million head)* 1.10 0.02 0.19 1.20 0.67 0.85 0.00 0.43 - 0.20 1.10

Beef and veal production (‘000 cwt)* 2,284 670 12,286 1,960 1,240 9,900 2,950 575 4,300 7,325 7,915

Total domestic consumption

('000 tonnes cwt)* 647 80 12,206 1,865 970 7,850 2,450 155 2,635 8,530 7,935

Domestic share of production* 28% 10% 88% 84% 60% 79% 83% 23% 61% 100% 96%

Per capita domestic consumption

(kg/person cwe)***25.8 18.3 38.8 12.9 24.0 37.9 57.6 56.1 0.7 5.8 15.5

Beef exports ('000 tonnes swt)† 1,078 417 981 208 337 1,217 266 311 1,249 - 244

Chilled % share of exports† 27% 6% 46% 83% 81% 13% 28% 13% 1% -

Average export price ($US/kg)†† 5.49 5.04 7.01 5.85 5.16 4.18 5.94 5.06 3.05 - 4.43

Top-3 export markets†Japan

US China

US China

Taiwan

Japan Korea

Mexico

US Japan

HK

US Japan

HK

China HK

Egypt

China Chile EU

China US EU

Vietnam Malaysia

Iraq-

Turkey B&H†††

HK Source: *USDA, MLA (Aust.) 2018 estimate; **USDA 2018 estimate; *** MLA (Aust.), FAO-OECD 2018 estimate converted to carcase weight equivalent; †GTA, DAWR (Aust.) 2017-18 actual, ††GTA 2017-18 actual. †††Bosnia & Herzegovina