October Market Report : S.E. Asia Beef Industry

23rd Edition : October 2015.

Key Points 

  • Indonesian importers in a powerful cost/price squeeze
  • Vietnamese butchers heavily discounting overfat carcases 
  • Cambodia to commence live imports within 3 to 6 months
  • China live cattle prices showing slow but steady gains
  • Myanmar peace deal impact unclearGraph Market Report for charts-4

 

Indonesia  :  Slaughter Steers AUD $3.97 / kg live weight (Rp9,800 = $1AUD) 

Prices of both live slaughter cattle and retail product are steady while the currency has strengthened a little.  Jakarta fat steer price Rp38-39,000 per kg live weight with Medan Rp40 to 41,000.

Sales of both slaughter cattle and retail beef demand remain soft as large numbers of high cost feeders flow into the feedlots in an attempt to fill the Q4 quotas.  These new, high cost cattle will present a new challenge to importers who are already having difficulties selling their lesser priced cattle currently on hand.

The court action accusing importers of price fixing continues adding to the general woes of the Indonesian industry.  At a time when trading conditions are at their most challenging, their government has them under maximum pressure to maintain low prices.  This situation cannot last but we will probably need to wait a few months before the recent high priced feeder imports appear as fat cattle before the butchers are forced to make a serious price correction in order to allow the importers to survive.

Small quantities of smuggled Indian beef have been reported in a limited number of retail areas around Jakarta.  The reports suggest that the sales have been from the back of motorbikes outside wet markets rather than at the normal retail tables.  Prices quoted have been in the Rp75,000 range representing a very significant discount to local product.  As long as the volumes and number of outlets remains low this new threat is unlikely to develop into a serious problem for the trade.

Apart from closing the gate, the only option for Indonesian importers is to improve their value adding performance in the feedlot and recover their buy-in losses through more efficient weight gain.  How far this can be pushed and how high Australian prices can go before this is no longer possible is a very difficult guess.  Certainly, any improvements in efficiency in feedlots cannot hope to keep up with the pace of the recent price rises in the Australian market.  It’s not going to be a happy Christmas for Indonesian importers.

Beef is not the only food commodity having difficulties with shifting supply and demand factors.  A number of Indonesian government policies have also created serious market challenges for the broiler chicken, rice, sugar and corn production industries.

I have been in Balikpapan (East Kalimantan) for the last few months where consumers at the high-end supermarkets are still presented with very high priced product.  I have no idea what volumes are sold at these prices but I am yet to see anyone buying beef at the counter when I visit and I only go there to check the prices.

High prices at the high end Farmers Market in Balikpapan, East Kalimantan. AUD$66 for Aussie Black Angus Rib Eye,$50 for tenderloin.

High prices at the high end Farmers Market in Balikpapan, East Kalimantan. AUD$66 for Aussie Black Angus Rib Eye,$50 for tenderloin.

Balikpapan Hypermarket Knuckle and Silverside @ AUD $15.60 per kg

Balikpapan Hypermarket Knuckle and Silverside @ AUD $15.60 per kg

 

Vietnam  :  Slaughter Steers AUD $4.22 / kg (VND16,100 to $1AUD)

Using HCM fat steer price of 68,000 Dong this translates to AUD$4.22 per kg live weight.  The market continues to mature very quickly as butchers get a better understanding of the factors affecting profitability from the processing of Australian cattle (all their local cattle are very lean).  As a result of this better understanding butchers are now severely discounting overfat cattle putting the pressure back onto the feedlots to improve their feeding technologies.  High yielding steers in Ho Chi Minh City are bringing as high as 69,000 Dong while poor yielders are discounted to 64,000.  This has come as a very nasty shock to some of the larger feedlotters who have a large number of long fed and over fat cattle on hand.  The result can only be more painful discounting until all the long fed cattle are through the system and feedlot processes are make more efficient.  If I were a Vietnamese feedlotter in this position, I would send my technical staff to learn from the Indonesians who are amongst the most efficient lot feeders anywhere in the world.

As usual, prices in Hanoi are a little higher than HCM at around 71,000 Dong per kg.

With Australian feeder and slaughter cattle prices rising and profitability for the importers tightening sharply, demand for live imports from Australia is backing off quite quickly.  ESCAS issues also continue to focus the importers attention on the potential for imports from South America.

Smaller players in the market are also under pressure as margins collapse.  Local observers suggest that many of these smaller operations will not survive.

The Vietnamese press has contained a great deal of comment on the recent Trans-Pacific Partnership (TPP) agreement to which Vietnam is a signatory.  The beef (and other livestock) industry can only see reduced import tariffs increasing the competitiveness of imported product at the expense of local farmer profitability.

Despite all this pressure on live cattle prices, retail prices across the country remain relatively constant.

 

Thailand  :  Slaughter Steers AUD $3.92 / kg (Baht 25.5 to $1AUD)

The important news for Thailand in October was the announcement of a partial (but substantial) peace deal and “sort of” cease-fire with a significant number of rebel groups in Myanmar.  It is not clear exactly how this will play out in respect to live cattle flows but on the one hand, the Karen group who facilitate the majority of live exports into Thailand via Mae Sot have signed the peace deal while the Kachin on the northern border with China have not signed and fighting continues.  Less than half of all the rebel groups have agreed to sign so far.  It will be interesting to see how the election of a new government led by Aung San Suu Kyi will allow the peace process to proceed.

The domestic prices in Thailand continue to be steady with no new imports in October.  Discussions with South American live cattle exporters continue.

The government has recognised the serious shortage of breeding cattle and has been offering farmers financial incentives to develop beef cattle breeding projects.

The Thai government is also in the process of establishing a special economic zone around the border crossing area at Mae Sot.  While their aim is to facilitate trade flows there has been very vocal objections from local traders that it might impact unfavourably on their current businesses.  Official figures suggest that 90% of the cross border trade is exports from Thailand to Myanmar while the largest single item of Myanmar exports into Thailand is live cattle.

Only about half of the rebel groups have agreed to the peace deal. Photo AFP

Only about half of the rebel groups have agreed to the peace deal. Photo AFP

 

Malaysia  :  Slaughter Steers AUD $3.45 per / kg (RM3.07 to $1 AUD)

Little change in Malaysia except for a continuing weakness of their currency.

Retail Indian knuckle is selling for 17.40 RM per kg (all Indian beef is boneless) or about $5.67 per kg representing about 50% of the price of other beef products.

 

Philippines  :  Slaughter Cattle AUD $2.69 / kg (Peso 33.5)

Optimism continues in the Philippines with an economy running along nicely and consumers with a little spare cash to spend on luxury items like beef.  Prices of chicken and pork have fallen significantly while beef has edged up a notch.  With the Christmas celebrations coming up soon the mood in the Philippines remains upbeat.

Great seasons in the Philippines with very few natural disasters.

Great seasons in the Philippines with very few natural disasters.

Money in the pocket, plenty of good food in Mum’s shopping basket.

Money in the pocket, plenty of good food in Mum’s shopping basket.

 

China  :  Slaughter Cattle AUD $5.25 / kg  (RMB 4.57 = AUD$1)

Live cattle prices continue to firm slightly with the Beijing fat steer price once again rising to 24 Y per kg live weight.  Retail prices for beef in Beijing have shot up although there has been no similar movement in the wet markets or in either retail sectors around Shanghai.

The food safety continues to be a massive problem with another report of criminal behaviour by a large dairy farm which allegedly sold 600 dead dairy cattle to an abattoir with the beef subsequently being sold into the retail meat market.

The first shipment of slaughter cattle was delivered from Australia to China by aircraft during October through Elders Australia.  This represents a very small but highly significant kick-off for this potentially massive trade.  The ramping up of export numbers will be slow which is probably a good thing to ensure that everyone is fully prepared to do a good job with the stock and maximise the chances of developing a profitable and sustainable business.

 

Cambodia

A world-class feedlot and international standard abattoir complex is in the final stages of completion not far from Phnom Penh.  The first shipments of cattle will come from Australia although there is little doubt that the owners will be closely examining their options for future supplies from South America.  My advice is that the first shipment is likely to occur within the next 3 to 6 months.

 

These figures are converted to AUD$ from their respective currencies which are changing every day so the actual prices here are corrupted slightly by constant foreign exchange fluctuations. The AUD$ figures presented below should be regarded as reliable trends rather than exact individual prices. Where possible the meat cut used for pricing in the wet and supermarket is Knuckle / Round.

151115 Price Table

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