The beef with trade wars

The beef with trade wars


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The exposure of Australian beef to a tariff battle between the US and China is minimal, but there are some spin offs worth watching.

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Over the past month, an impending trade war between the United States and China has dominated global commentary. But where does Australian beef fall in this matter? The exposure of Australian beef to a tariff battle between the US and China is minimal, however, there are some spin offs worth keeping an eye on.

The exposure of Australian beef to a tariff battle between the US and China is minimal, but there are some spin offs worth keeping an eye on.

The exposure of Australian beef to a tariff battle between the US and China is minimal, but there are some spin offs worth keeping an eye on.

On March 23, President Trump announced his intention to put tariffs amounting to US$60 billion on imports from China. China retaliated with a list of 128 products and then a further list of 106 US products that would be subject to a 25 per cent tariff – 33 of these were agriculture related and included the big one for US, China trade – soybeans. Also included were wheat, corn and beef. 

The US and China beef trade is only small. The US regained official access to the China market in mid-2017 and by the end of the year it had only exported about 3000 tonnes. In comparison, US total beef exports in 2017 were close to 920,000t. Compliance with the China import protocols around traceability and HGP use limit the volumes of US product available for export.

Realistically, given the small volumes of beef going direct to China, the imposition of a 25pc tariff is expected to have minimal impact on the US beef industry and even less on the broader global beef trade. Some of the US product may continue to go directly into China and be placed in a premium market where the 25pc tariff does not affect consumption. There is a possibility some product may be directed through Hong Kong (the US exported 110,000t of beef to Hong Kong in 2017), some may stay in the US and some may be sent to other markets.

The trade wars raise uncertainties around economic growth and currency movements.

Despite a possible trade war between the US and China having minimal direct impact on the beef industry and Australian beef producers, there are a couple of things to keep watch on.  

There will be some disruption to feedgrain markets. A Chinese tariff on soybeans would increase the cost of animal feed in China, causing pork prices to rise and possible upside for beef imports. China has also imposed a 178.6 anti-dumping duty on US sorghum which may see some additional demand for Australian sorghum and barley. At already high prices, they are not expected to be the first port of call to fill the Chinese feed gap. However, the duty will contribute to maintaining our sorghum price levels.  

These “trade wars” have parties jostling for positions. The US indicated it was considering re-joining the TPP, no doubt to shore up ties with Japan. South Korea suggested it may consider joint entry along with the US. The trade wars raise uncertainties around economic growth and currency movements.

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