Northern Australian cattle export trade lulls

A cattle export ship maneuvered alongside Darwin Harbor.

LACK of supplies, high livestock prices and COVID-related disruptions in key markets have hampered the northern Australian livestock shipping trade since August.

Export sources have warned in recent months that shipments will slow significantly in the face of increasing headwinds, including the speed at which the Delta variant of COVID has swept through major cities in key northern livestock markets. Indonesia and Vietnam.

Orders stranded before Delta’s impact meant the shipping activity to deliver these shipments continued through July and August, but much of the wind has been removed from the sails of the trade since then, according to the reports. market reviews and shipping data.

Commercial activity continues with two ships due to load at Darwin in the coming days, another at Townsville and shipments from Broome and Fremantle also expected.

But compared to previous months when it wouldn’t be unusual to see around 15 individual livestock shipments leaving Australian ports for Indonesia and Vietnam, trade levels have fallen below half that level through September.

Of the 30 or so ships accredited to operate from Australian ports, at least 10 are currently working on routes outside Australia, transporting livestock from New Zealand and South America to China and Europe from East to the Middle East.

By the middle of last year, the reverse situation existed with around 30 vessels simultaneously transporting Australian cattle to markets in Asia and the Middle East.

CEO of the Northern Territory Cattle Exporters Association Tom dawkins (left) attributed the slowdown to several factors, including erosion of demand in Indonesia and Vietnam due to disruptions related to COVID-19, which in turn is slowing the ability of importers to sell livestock previously imported from their feedlots.

While paying record prices to buy Australian cattle, Indonesian importers are required to sell cattle in accordance with the retail prices that are regulated in Indonesia in order to maintain affordable access to beef for citizens.

This results in negative trade margins of around 60 AUD cents / kg for Indonesian feedlots selling cattle of Australian origin.

Livestock availability is another issue as more North Queensland cattle herds are drawn south by domestic buyers of grass, grains and processors, while the dry season herding period is underway. much of it finished and the traditional lull of the wet season begins.

Traders in Indonesia and Vietnam have slowed orders in an attempt to minimize losses and reduce buying, which in turn forces exporters to strategically step back from active trade to the extent that they normally could, Mr Dawkins said.

Some exporters also choose not to renew long-term charters in preference to short-term ad hoc bookings. This resulted in a reorientation of livestock transport capacity out of Southeast Asia to serve other international routes, while other maritime operators used the downtime to perform maintenance and changeovers. crew.

“As such, monthly shipments numbers are expected to settle at historically low levels as the market resets,” he said.

The year-to-date export figures for Darwin had held up remarkably well under the circumstances, he said, a lull had now set in.

“Year-to-year fluctuations do not occur so dramatically at Darwin Port and although trading conditions have been very difficult, our dry season volumes have been remarkably resilient,” he said. declared.

“But maritime activity really fell in September and it will remain very moderate now until the start of the dry season in 2022.

“The way all market forces have aligned, the next six months will be the calmest trading period we have seen in a long time.”

Mr Dawkins said the port of Darwin is recognized as the world’s busiest live fish export port, but over the next six months there will be far fewer road trains delivering cattle to East Arm.

“I hope we come out of the rainy season with a significantly improved COVID situation in Southeast Asia and better trading conditions for importers and wet market customers.

“The market is certainly tilted in favor of producers, it is good to see ranchers in the north being rewarded with exceptional prices for cattle.”

“Our direct export supply chains are an important part of the NT cattle equation, with around 400,000 cattle shipped to Southeast Asia from Darwin each year and around 26 million Indonesians eating beef from the Northern Territory each year. “

“The year in which a new era of prices has emerged”

Mr Dawkins said the price of Australian live cattle in South East Asia compared to frozen Indian buffalo meat, canned products or even live cattle shipped from South America would always change but, for the At the moment, Australia’s competitiveness was deeply compromised.

“I think we’ll look back and see 2021 as the year when a new era of pricing has clearly emerged.

“It looks like Australian cattle have moved into a higher price bracket and, while the market is still moving in cycles, we have crossed an all-time high and it is difficult to see a significant downward correction in the pipeline.”

He said the recent trade opening shipment of Brazilian cattle to Vietnam, Australia’s second largest market for live cattle, also represented a fundamental shift in trade dynamics.

“Make no mistake, the start of Brazilian cattle exports to Vietnam is of great concern. It highlights that we have reached a tipping point.

“Regardless of the number of additional shipments from Brazil, the entry of South American cattle into South East Asia shows that Australian cattle prices and supply limitations absolutely reframe our long-term market presence. term.

“Just as the cheaper frozen Indian buffalo meat has really tested the trade margins of live cattle in Indonesia, we must not lose sight of the fact that much of the Australian beef industry will continue to be shaped by our export competitiveness in price sensitive markets. “

“We have spent the last decade talking about the long-term strategic importance of our live cattle export partnerships. But right now, we have reached this intersection of unannounced livestock prices, a depleted national herd and overloaded global demand for meat. These market forces are testing Australia’s ability to reliably supply importers like Indonesia and Vietnam like never before.

“It remains to be seen how this test reshapes these long-term export markets. “

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