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BEEF production is big business in both the United States and Australia but recent trade deals between the two has caused some concern for farmers.
Prices hit record highs in Australia last year, but due to global economic factors and higher supply, have fallen quite substantially since. Price indicators suggest heavy steer prices have dropped by 24% to around AUS$3.51/kg (US$2.35/kg) liveweight.
From a local peak in October 2022, Australian heavy steer prices have fallen 22% to US$4.18/kg carcass weight. This is due to not only a fall in prices locally, but also a fall in the Australian dollar.
In early November 2022, heavy steer prices in the USA overtook Australian prices and have continued a steep rise since. This has opened a US$0.48/kg gap as American supply shrinks and Australian supply expands.
Taking a look at the trade deals between the US and Australia, the Department of Agriculture, Fisheries and Forestry manages the United States beef quotas, which were put in place by the Australia–United States Free Trade Agreement (AUSTFA) and the General Agreement on Tariffs and Trade (GATT).
Australian exporters can export 448,214 tonnes (combined AUSFTA and GATT) to the US at a zero tariff rate through these quotas.
However, Australia’s overall beef exports have been running at record low levels more recently due to hard hitting droughts, that cut slaughter cattle availability, and a lack of labour in the meat processing sectors.
The total Australian beef export volume to all markets last year reached just 854,592 tonnes, the lowest seen since 2003 (840,929 tonnes), when BSE terrified global market trading.
In comparison, Australia’s beef exports topped 1.25 million tonnes in the peak years of 2018 to 2019. This year’s forecast is more promising at just over one million tonnes carcase weight exports.
While lucrative Chinese markets closed up for Australian beef, other markets stayed open. However, thanks to a plentiful supply of home produced beef last year, the US only took 133,925 tonnes of Australian beef, down from an already low 145,263 tonnes the year before.
During peak export times Australia regularly sent 270,000 tonnes to 300,000 tonnes of grinding beef into US ports each year.
US beef exports, imports
Figures show that in 2022, the US exported 1.47 million tonnes of beef and beef variety meat worldwide, amounting to a record US$11.68 billion. This volume accounted for 15.2% of the beef and variety meat production in the US.
The top ten beef export markets for the US by value in 2022 were: South Korea $2.7 billion; Japan $2.32 billion; China $2.16 billion; Mexico $968.38 million; Canada $834.95 million; Taiwan $746.92 million; Hong Kong $390.77 million; European Union $246.36 million; Philippines $161.37 million and Indonesia $123.74 million.
The United States is the world’s largest producer of beef and its second-largest importer, according to USDA. The US imported about 3.3 billion pounds of beef in 2022 (a record high), and exported about 3.5 billion pounds. The US imported the most beef from Canada (29 percent), followed by Mexico (22 percent), Brazil (14 percent), Australia (12 percent), New Zealand (12 percent), all others 12 percent. United States also imports live cattle from Mexico and Canada.
US beef rancher perspective
Rick Fox and his wife Theresa raise Hereford Angus cross cattle on their ranch at Hermosa, South Dakota, along with their son Brent and his family.
For the past 40 years they have run a cow/calf operation, raising replacement females along with their own bulls. Mature cows graze all year long, if the snow doesn’t cover the grass, with extra protein and minerals to supplement the cattle bought in.
Rick said: “Our steer calves are normally sold at Ft. Pierre Livestock in early December weighing 600 pounds. Heifer calves are weaned and wintered at home with grass, hay, and a protein supplement of barrels and cake.
“The heifers that we do not keep for replacements are either sold in the spring or kept longer depending on the moisture and the feed supply,” he said.
Prices for Rick’s December 2022 sale of steer calves were higher than the previous year’s averaging $2.13/pound compared to $1.99 in 2021.
Rick says local consumers need to ensure the beef they are purchasing really is produced in the US, if they want to support beef farmers like him.
He said: “Beef imports from all countries have always been a detriment for USA cattle producers. The current Product of USA label that allows imported beef to be sold under it, is wrong and needs to be fixed.
“Beef coming to be repackaged or live cattle coming in to be further fattened or processed are allowed to use a Product of USA label. Consumers who want or think they are buying USA beef are being misled by the major processors and retailers.
“The US raises enough feed to raise more cattle. If the exported feed, grains and hay were kept here a lot more cattle could be raised and fed here. Instead, we export livestock feed and import beef, which is complete ignorance!”
Speaking about Australian imports, Rick said: “I have been to Australia. Each country should take care of their own needs first. Talking to people there, they liked their beef and some didn’t like USA beef.
“I ate quite a bit of Australian beef and didn’t care for it. One gets used to a diet and taste and that is what they will like. Consumers are the ones with the buying power and we are all creatures of habit. Producing a product that will sell in your area is true in every industry,” he said.
Rick mentioned one other comparison between the two countries which is a beef checkoff tax that cattle producers pay at point of sale of cattle.
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“The US checkoff tax is one dollar per head,” he said, “and I believe Australia is five dollars per head. Both are mandatory. This beef tax is used to advertise, promote, research, and educate for beef, not cattle.
“Cattle producers pay, beef processors and retailers get the benefit because they are like any business, pay as little as you can for inputs and charge as much as you can for the outgoing product.
“Ranchers and feeders share of the consumer dollar has gone from 60 cents to under 40 cents during the 35 plus years of the beef checkoff tax existence,” said Rick.
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Australian farmer perspective
Bradley Bellinger and his wife Allison operate a 4,600 acre farm near Glen Innes in Northern New South Wales, on a similar latitude as southern Texas.
The farm is typical family operation in the region running around 4,000 sheep and 175 cows and calves. Beef, wool and lamb are the main sources of income.
Bradley said: “Australia’s main markets for beef are South Korea, 320,000 tonnes; Japan 300,000 tonnes and USA 260,000 tonnes. We had a bad drought in 2017 to 2020 and our cattle herd went from 28 million down to 21 million so our export figures for the last couple of years don’t reflect our long-term averages.
“We also have a big live export market sending about 800,000 cattle to Asia out of the top end.
“Since the 1970s our government has pursued a free trade agenda and has decimated farmers’ incomes and our manufacturing. My grandfather made the same income off 600 acres running 600 sheep and 40 cows in 1950 as I do now in real terms when we had tariffs on imports and a wool floor price scheme. Free trade does not work for us,” he said.
The Australia/USA free trade deal was ratified in 2005. Bradley says Australia has gone from a trade deficit with the US of $6 billion to over $18 billion today, so it is working in favor of the US.
He explained: “Most of the beef we send to the US is grinding beef. Due to our climate and production system much of our beef is turned off grass so is leaner than US beef.
“Typically our trim would be lean at say 90cl (90% meat, 10% fat). Food processors would mix this trim with US trim at 50cl and produce mince at say 70cl for use in hamburger patties. So a symbiotic relationship exists there.”
Bradley says Australian beef imports into the US does hurt the cattle prices, but that the biggest threat comes from Brazilian beef. A 340 gram can of corned beef from Brazil retails in Australian supermarkets for AUS$2.99 and the Australian equivalent retails for AUS$6.50, therefore local farmers cannot compete.
He said: “Australia’s free trade policy has decimated rural Australia. We have no tobacco industry or dried fruits industry and have lost 9,000 dairy farmers since deregulation.
“We import 70 percent of our processed pig meat and 90 percent of our seafood yet we are surrounded by sea. Last year we imported AUS$19 billion worth of food and beverages,” he added.
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