57th Edition : August 2018.
- Indonesian slaughter steer prices continue to climb.
- China prices remain firm during the beginning of the African Swine Fever outbreak.
- All regional currencies have gained against the weakening AUD$.
Indonesia : Slaughter Steers AUD $3.94/kg live weight (Rp10,650 = $1AUD)
Prices for slaughter cattle have risen again this month with the new indicator rate at Rp42,000 per kg live weight for steers at the feedlot gate. I have heard prices as high as Rp44,000 in some parts of West Java. There may be a small component of the Qurban affect in this higher rate but generally Australian cattle are not regarded as suitable for this religious festival as animals are required to be unblemished by features such as brands, earmarks, ear tags and castration. Having said that, there is a small but growing number of Australian cattle that are slaughtered (under ESCAS conditions) for Qurban as there is a trend for some groups to avoid the mess that is caused by slaughtering in the grounds of their mosque by contracting the actual slaughter process out to a nearby abattoir where people can attend and see their animal slaughtered under religious supervision without danger or fuss or a need for them to clean up afterwards. Quarters of beef and cleaned offals are then delivered to the mosque where they are packaged and distributed to the needy.
It is interesting to note that the recent series of live cattle price rises have not yet resulted in any noticeable increase in the wet market beef prices. By contrast some supermarket prices have risen dramatically. See the photo below from a large Jakarta supermarket chain where the price of knuckle at the end of August was Rp199,000 per kg or almost 25% higher than the previous months.
While the first 6 months of 2018 saw an average of 35,000 head of live cattle per month imported, the figure for July was 60,000 while August was 70,000. This surge is to top up the feedlots after the Ramadan, Lebaran and Qurban festivals but will almost certainly result in a glut of fat cattle in November/December.
This flush will need to be offset by a monthly average of about 30,000 from September to December to guard against oversupply. Finding the right balance between under and over supply is proving to be a rather difficult task with the “right number” appearing to be around 400-450,000 head annually while a total of only 500,000 may well be too many and result in a price collapse.
Industry observers are still reporting significant sales of short fed cattle to keep customers supplied and cash flows in the black but this only leads to further uncertainty when importers are trying to calculate their future incoming shipment requirements.
The turmoil of the last 2 years since the introduction of Indian beef imports is finally leading to some serious restructuring within the Indonesian feedlot sector. A high proportion of the major companies within the live import sector have recently made significant changes to the way they are doing business. These moves include :-
- The sale of the business – in the case of PT Elders Indonesia.
- Purchase of an existing business – PT Elders was purchased by a new company which included an existing feedlot player, an Australian export company and a third party from outside the sector.
- Closure of high cost office infrastructure with administration functions sent back to the feedlot office.
- General aggressive reorganisation, downsizing and belt tightening.
Some enterprises still continue with their previous business model but are carefully monitoring the reinvention of the import, feedlot, processing and distribution sectors and may well soon join the wave of rationalisation.
Vietnam : Slaughter Steers AUD $4.08 / kg (VND16,900 to $1AUD)
Prices have stabilized this month with the indicator rate for steers holding at around 69,000 Dong per kg live weight. The North continues to have significantly higher prices for steers than HCM City. Demand from both importers and consumers appears to be firm with feedlot capacity at about 50%. The weaker AUD$ will be encouraging importers to fill that vacant pen space although the price of feeder steers delivered Darwin has risen to around AUD$3.05 at the end of August so this will be tending to put the brakes on aggressive import numbers. Beef prices in the wet and super markets are steady.
China : Slaughter Cattle AUD $5.35 / kg (RMB 4.95 = AUD$1)
Prices in terms of Yuan haven’t changed since last month although the AUD rate has increased due to the weakening of the Aussie currency against virtually all of our customer country currencies.
The big question in China at the moment is will the African Swine Fever (ASF) outbreak be brought under control or will it overcome the efforts of the veterinary authorities and devastate the national pig industry.
ASF is a particularly nasty disease of pigs :-
- It is caused by a virus and there is no vaccine or satisfactory treatment
- The only approach to control is eradication by slaughtering infected herds then disinfection followed by restocking with test pigs some months later to determine if the virus is still present.
- Fortunately, the virus is not harmful to humans but is very savage on pigs causing a very high death rate.
- The feature which makes this disease so difficult to control is that the virus can survive for extended periods in the environment and in processed pig products for many months so very strict quarantine is necessary on both live animals and all of their products.
To make things worse, Easter Inner Mongolia, one of China’s main livestock production regions, has recently experienced an outbreak of Anthrax as well as a significant period of drought.
Chinese consumers are extremely wary of any animal diseases as their farmers and traders are notorious for selling dangerous and contaminated products. Those who don’t understand the real implications of the ASF outbreak are either switching to reputable branded pork or changing to chicken or beef. Given the potential for rapid spread of ASF, it shouldn’t take more than a month or so to find out if the government’s attempts to control the disease have been successful or not. If not then there will be a massive reduction in pork supplies as the quarantine and eradication process gets underway with potential for more pressure on demand for beef and chicken.
China has most of our South East Asian customers as their near neighbours which means there is serious potential for this disease to spread out of China and throughout the region. Given that most of the SEA are big pork consumers this could also create massive disruption for meat supply and demand across the region.
My agents also advise that sheep prices are on the rise (Y22 per kg live) as a result of multiple factors and are not expected to fall again for some time.
The article below from the Myanmar Times reports the opening of government to government negotiations to establish a protocol for exports of live cattle from Myanmar’s northern border (Muse) across into China (Ruili) where they will be slaughtered. The article specifically states that “China wants to legally buy 1 million head of cattle from Myanmar”. An unknown number of cattle are currently smuggled from Myanmar into China and Thailand but the various transit routes are difficult, dangerous and expensive so a legally accepted protocol with all the necessary quarantine procedures carried out at the northern border makes a great deal of logistic and commercial sense. Can Myanmar supply 1 million per year? Probably. With a national herd estimated at about 15 million and a Buddhist population that eats very little beef, the sourcing of 1 million surplus cattle including aged draft ox and bulls as well as cull for age cows seems like a reasonable prospect.
Philippines : Slaughter Cattle AUD $3.74 / kg (Peso 38.8 to AUD$1)
My agent continues to report favourable economic conditions in the Philippines with plentiful supplies of a broad range of foods at affordable prices. Wet market beef and live cattle prices are rising slightly with the indicator price of slaughter steers up from 140 last month to 145 Pesos per kg for August.
Thailand : Slaughter Steers AUD $3.99 / kg (Baht 23.8 to $1AUD)
Prices of bulls and steers have risen slightly this month with steers selling for THB94 and bulls for THB97 so I am using 95 as the indicator rate for August. My agent reports that Myanmar is experiencing severe flooding in its eastern regions which is restricting the export of live cattle out of Myanmar into Thailand and this is probably responsible for the major part of this month’s price increase.
I visited northern Italy during August and took the photos below of beef in a local village butcher shop.
Australian butchers continue to have some of the best displays and quality of beef in the world. This presentation in Woolworths in Darwin during August was outstanding.
These figures are converted to AUD$ 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.
One thought on “August Market Report : S.E. Asian Beef Industry”
Thanks Ross. Always interested in your market reports.