The Chinese beef import quotas announced on New Year’s Eve were the talk of the industry early in January. Quota remain a hot topic around the saleyards, this that, and El Nino predictions the black clouds on an otherwise rosy outlook for beef and cattle prices.
The Beef Producers Intentions Survey conducted in November had beef producers in particularly high spirits. It might be a little different now with trade barriers and climatic issues rearing their ugly heads in the first six weeks of the year.
We now have the first piece of data since the Chinese import quotas were announced, with January export data showing a predictable pattern. Cattle slaughter has been on the rise, with hot global demand for beef driving margins and a slow increase in slaughter capacity.
Thus, it was not surprising to see Australian beef exports increase 4% on January 2025. Figure 1 shows the increase in exports best with the rolling 12 month moving average hitting a new peak in January of 128,813 tonnes.
January beef exports were 3,294 tonnes higher than January 2025, and figure 2 shows that 1,728 tonnes of the increase went to China. The increase in exports to China in January comes out at 12% which is a significant jump.
While part of the increase in beef exports to China is due to better supply, there is likely some further impetus from Chinese importers, and Australian exports, shifting product to China while there is still plenty of room in the quota.
The China quota for Australian beef stands at 205,000 tonnes and any volume above that will incur a prohibitive tariff of 55%. After January 188,364 tonnes of quota is left. If we assume that exports to China will be up 12% until the quota is full, the 205,000-tonne mark will be reached in August.
There has been plenty of talk in recent days around models predicting potential El Nino later this year, which would obviously bring strong supply, a squeeze at processor levels, and lower prices. An emerging El Nino, if it brings a dry spring and summer, would almost coincide with the time of year we would expect to fill the Chinese beef quota.
What does it mean?
We only have to go back to 2023 to find the last period of El Nino discussion in the market. Figure 3 shows the price downturn in spring, while the season actually turned out to be ok, and prices recovered. There was a lot of blaming of weather forecasters for the destocking and price downturn in 2023, as memories of the 2018-2019 El Nino were still fresh.
There is plenty to be positive about in global beef markets, but the weather can throw a pretty big spanner in the works when it comes to supply.
Key Points
- Total beef exports were up in January, with China leading the charge.
- At current export pace the China quota will be full by August.
- The chances of El Nino are strengthening, bringing more potential downside later in the year if dry conditions prevail.
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Data sources: MLA, ABS, DAFF, Mecardo
