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26 Jun, 2018

Growth in Global Beef Market

Irish beef is highly export dependent, with figures indicating that up to 90% of our beef is exported. With the uncertainty of Brexit looming, it is more important than ever for Irish companies to keep up to date on the global beef market.

Irish Context

The Irish beef industry is highly export dependent and in 2017 exported 556,000 tonnes of beef valued at €2.5 billion according to Bord Bia. With production at 617,000 tonnes in 2017, according to the CSO, this indicates that Ireland exports over 90% of its beef production in volume terms making Ireland a significant net exporter. The main markets for Irish beef are the UK, continental EU markets and non-EU third country markets which took 51%, 43% and 6% respectively of Irish beef volumes in 2017. With Brexit fast approaching and beef products among the most high risk food products and the potential threat of more protectionist trade measures it is important for Irish companies to keep up to date on developments in the global beef market. Irish beef exports to international markets grew 37% to over 34,000 tonnes in 2017 which clearly shows that Ireland is growing in non-EU markets and must be aware of global market developments. The following gives a brief summary of the global beef market for 2018 with a focus on the Chinese beef market which Ireland recently gained market access to.

Global Beef Market Fundamentals

The global beef market is driven by supply and demand dynamics which fluctuate from year to year. According to the USDA in its latest global beef report they forecast a 2% rise in world production for the full year 2018 to 63 million tonnes with the US, Brazil, China, Argentina and Australia among the largest producers. Out of this total of 63 million tonnes, 60.9 million is consumed with demand driven mainly by large consumers of beef which include the US, Brazil, China, Argentina and Mexico with large fluctuations in consumption per capita among regions.

Global Production Outlook 2018

Production is set to be driven in 2018 by stronger growth in Brazil, Argentina and the US. Higher domestic demand, increased carcase weights and strong export demand is likely to boost Brazil’s production in 2018. In Argentina, drought conditions are likely to lead to higher throughput of cattle and ultimately production with domestic and export demand also impacting production there. Drier weather conditions impacts pasture conditions and ultimately will negatively impact growth in Argentina’s cattle herd while weather conditions are also slowing herd rebuilding in Australia which will impact short to medium term supplies. According to Meat and Livestock Australia production in Australia is set to rise 3% in 2018 to 2.2 million tonnes driven by higher numbers with average carcase weights expected to ease. In the US the USDA forecast a 6% rise in beef production in 2018 reaching a record 12.6 million tonnes with this rise driven by higher levels of herd expansion.

Global Trade

Focusing on global trade according to the USDA less than 20 million tonnes of beef are expected to be traded in 2018. The largest exporters in the world are Brazil, Australia, US and New Zealand with Ireland the 5th largest net exporter in the world. Other main exporters include Canada, Uruguay and Paraguay.

Exports are forecast to rise by 5% to 10.5 million tonnes driven by higher shipments from Brazil, Argentina, Australia, and the US. Russia’s sanctions on Brazil will lead to increased global competition as Brazil seeks to focus shipments to new destinations, most likely to Asian markets. Robust demand in Asia particularly China and Hong Kong will also continue to grow as stagnant domestic production is unable to match rising consumption. US exports are forecast up 6% to a record 1.4 million tonnes due to higher production levels with key US markets including South Korea, Japan, Mexico and Canada.

Global imports are forecast at around 8 million tonnes with the largest importers being the US, China, Hong Kong, Japan and South Korea.

Chinese Beef Market

Recently Ireland gained market access to supply beef to China which is one of the largest beef consumers and importers in the world. Chinese consumption was estimated at around 7.8kg per capita in 2017 according to Meat and Livestock Australia. Although this is relatively small compared to the 19kg per capita equivalent beef consumption in Ireland it is still a growing import market on the back of a rise in middle class consumers with higher levels of disposable income. Bovine products are traditionally used in stir fry, stew, hot pot and dumpling dishes with the food service and retail market the main channels for imported product. Chinese production according to the USDA is set to rise 1% in 2018 however this is not sufficient to meet consumption which is expected to rise 3% for the full year. This means imports are set to rise due to demand outgrowing supply. Demand is expected to rise significantly there in the coming years with many industry sources estimating that imports will double by 2020 compared to 2017 levels.

In terms of market access, the market is competitive and the largest direct importer is Australia who have an established presence in the market and supply around 17% of imports with most of this frozen product. Other large beef suppliers to this market include the US, Japan, New Zealand and Brazil. New Zealand currently has a free trade agreement in place with China with a 0% tariff on beef products which gives it a distinct advantage. Australia has a trade agreement in place which is lowering tariffs from the current level of between 7.2% and 15% on various beef products to 0% by 2024. The US, Brazil, Uruguay, Argentina and Canada all are subject to tariffs of between 12% and a 25% depending on product type.

As China is such a large market and importer this means that even a small proportion could be significant for an exporter like Ireland. Already six Irish beef plants are authorised to export to China and this is likely to grow in the future. Furthermore for Irish companies to maximise growth in this market exporters must keep updated on market trends in China and also the main competitors in that market namely, Australia, the US, New Zealand and Brazil.