Without doubt 2019 will be remember as an extremely tough year for our fellow Producers. It is hard to imagine consecutive years with such devastating impact on our people, our stock and our country. To recap on 2019 and look to more prosperous times ahead there are a number of events which may give insight into the future;
#1. African Swine Fever - 2019 will always be remembered as the year when ASF changed the global protein landscape. While ASF is not a new disease throughout parts of Europe & the Baltic it really hit headlines in late 2018 when China became infected. China is a global pork powerhouse with >50% of the world's pig population - last official reports out of China note a >40% loss in pork production, a figure many believe grossly understated. As ASF continued to ravage through China the severe protein shortage, somewhere in the realm of 20MT (20 x Total Australian Beef Exports), became evident & competition for global protein skyrocketed taking Australian beef export prices along. In 2020 ASF will continue to impact China and is spreading throughout Asia - the long awaited global protein shortage has arrived.
#2. Prices defy the dry - In general, cattle prices defied the dry and remained at levels that would be considered substantially higher than in previous droughts (most recently 2014). This is largely the result of unprecedented global demand for beef, particularly quality Australian beef. The 90CL price in the USA gives insight into global demand for grinding/lower grade 'cow' beef. In late 2019, fuelled by competitive buying from China & the USA the 90CL price hit a record of $970c AUD per kg and traded throughout the year at levels well above prior years. While the price did come off the highs post Chinese New Year buying the protein deficit remains. The strength of this product underpins values for cows & sets the base for the Australian cattle prices.
#3. Demand for quality is not slowing down - The most robust data around beef trends comes from the mandated USDA reporting system yet the trends are global. In 2020 USA Producers will produce double the quantity of Prime & Choice Grade beef (upper 2 grades) than in 1997. At the retail counter Prime-Choice has increased 50% in price over the past decade while Select (lower grade) beef has remained flat. At Producer level the USA grading system pays on USDA grade - on a base 300kg carcase the difference between Choice-Select in 2019 has averaged $96. Despite the USA data we live in a global market place & it is clear that Consumers have a strong desire to eat quality beef.
#4. The recovery ahead - Given the positive outlook for Australian beef prices the challenge ahead remains restocking post rain. The conditions have dictated unprecedented cow slaughter through 2019 meaning we are operating on a reduced National Herd. With increased demand from Restockers and robust market support from export markets higher prices are inevitable. How high remains to be seen and will obviously be dictated by rainfall.
