The global market continues to throw up new challenges and opportunities for Australia’s beef industry. Last week, we heard China had suspended beef imports from six Australian processors. While we hope this matter can be resolved quickly, another matter that has the potential to have a much larger impact on Australian producers, has also come to light.
Japan’s beef imports have recently hit their ‘trigger level’, initiating safeguard measures. This will mean that imports of frozen beef into Japan will be faced with an additional tariff – increasing the current rate from 38.5 per cent to 50pc. The ‘trigger point’ occurs when import volumes for a quarter increase by greater than 17pc on the volumes in the corresponding quarter of the previous year.
Off the back of some very strong production growth, the US has been a large contributor to the growth in Japanese beef imports in 2017. Beef imports from the US totalled 95,660 tonnes - 45pc of which was frozen beef - for the first five months of calendar year 2017, an increase of 34pc on 2016.
US frozen beef imports will now have the 50pc tariff imposed from August 2017 through to March 2018.
Fortunately as Australia has a trade agreement with Japan, we are excluded from the measure and our tariff rates continue at the rates prescribed by the Free Trade Agreement. In the case of frozen beef, Australia’s current tariff sits at 27.2pc.
Fortunately as Australia has a trade agreement with Japan, we are excluded from the measure.
At face value, the implementation of Japan’s safeguard measures is considered a positive opportunity for Australian exporters with high cattle prices and large numbers of cattle on feed. It will relieve some of the pressure applied by the US with their increasing production and exports.
However, with all market protection measures there are other consequences. One is that all beef prices in Japan could rise, causing consumers to decrease their consumption – not good news for any exporter to Japan. Retail prices for beef in Japan have been relatively flat for the past 12 months – imported Australian and US brisket was selling for about $26.50/kg in June which is about half the price of Japan’s domestically-produced beef.
Another consequence may be that US product is redistributed to other markets – whether that be South Korea or back to their domestic market, causing prices in these markets to ease.
Australian exports to Japan have performed strongly in 2017, with the volumes to June 2017 showing a 22 per cent increase on the same period in 2016 and returning to levels seen in 2014 and 2015. At this stage, it is too early to determine the full impacts of the increased tariff but it is something to watch closely over coming months.
