Episode 3 explains what Trump's tariffs could mean for cattle, sheep prices

Farm Online

Episode 3 director Matt Dalgleish discussed the potential impact of Trump's agricultural tariffs on Australian cattle and sheep prices with national beef writer Shan Goodwin.

Transcript

00:00As Australian red meat exporters wait to hear whether they'll be hit by a 25%

00:04tariff that the US President is rolling out on agriculture imports, Economist Episode 3

00:10have run some analyses looking at the level of exposure each state of Australia has.

00:16Matt Dalgleish is here to tell us what it showed.

00:19Yeah, so anyone that looks at those export markets, whether it's sheep meat or beef,

00:22would probably know we're about a third of our exports go to the US, give or take,

00:28in any given year. But when you start to look at the individual states,

00:31there actually was quite a reasonable spread, particularly in the beef space,

00:34if we start there. You had the WA market was about 14% of their export,

00:40value of their exports go to the US, whereas the statewide Tasmania was actually closer to 80%,

00:46which is quite a bit of distribution between the two. I guess geographically it makes sense

00:51with the Western Australian continent being the other side, further away from the US,

00:56and the eastern seaboard being closer. So that makes sense. And things like there's a grass-fed

01:01program that two of the Tasmanian avatars run specifically, and we have seen that grass-fed

01:06sector in the US particularly growing over the last few years. That kind of consumer there that

01:11wanted to have a beef product that has maybe slightly higher sustainable credentials, I guess,

01:16in the consumer's mind, whether that's accurate or not is another story. And then when you come

01:21to the mainland, most of the key states like Queensland, New South Wales, Victoria were in

01:26between that 20% to 35% level. I think New South Wales was about 20%, Queensland 23%, and Victoria

01:34was about 36% in terms of their exposures. So yeah, that's how the beef kind of situation

01:39stacked up. And that's a reasonable amount of exposure, even at that 30%, 20% or 30% level.

01:45Oh yes, yes, absolutely. Especially for the country's biggest cattle state, Queensland. I

01:50mean, that is a lot of beef still, isn't it? What about sheep side of thing? How do the states

01:56stack up there? Yeah, so again, a reasonable distribution, not quite as wide in terms of

02:01the states, but you had again, WA was the lower one at 10%. And then South Australia actually was

02:07the highest for sheep meat at 48%. And for beef, South Australia was about 49%. So actually,

02:13I was quite surprised to see South Australia was quite exposed on both beef and sheep meat being

02:19close to that 50% mark of their exports going to the US, given that little bit further away from

02:26the US side of the continent. Yes, absolutely. And of course, Matt,

02:31the reason we're so interested in the US at the moment is the big volumes, particularly of beef

02:36that we've been sending over there. And the fact that that's providing a pretty solid foundation

02:42for our cattle market at the moment. How do you see cattle prices tracking in the next few months?

02:48Yeah, it definitely has been supporting the market. That's been the case for probably a

02:52year and a half or more now. And they moved to being our top destination about that time too.

02:57So they've kind of outcompeted Japan. And more recently now, China's actually

03:02pushed Japan into third spot. So we're seeing a bit of a change of demographic there. But that

03:07US, the really tight supply we're seeing in the US, the cattle herds down, I think the lowest now

03:12since 1951. So some 75, 76 years, we haven't seen their cattle herd this low. So I think that kind

03:22of level of tightness of supply is going to persist. And they're still in a liquidation

03:27phase now as far as the data I look at shows. We're probably slowly moving toward the rebuild

03:33there. But it's probably it's going to be, I think, at least six to nine months before we go

03:36into the real full rebuild phase. It's still very dry in a number of cattle producing states

03:42and regions in America, isn't it? That's right. So we need, yeah,

03:46and certainly the prices are starting to try and encourage a move towards rebuild. And we are

03:50seeing some early signs, but we're probably not there yet. I think, yeah, like I said, I think we

03:55might get there either late this year or early next year. But then even if we do flick into that

04:00rebuilding in the US, given how much they've been drawing down on their supply, that it's going to

04:05take a couple of years to get back up and full production levels. So I think that's going to

04:10continue to support Australian pricing this year and into next year as well, at a minimum. I mean,

04:16obviously, if we don't get a very good autumn break in the south, that might be a bit problematic.

04:21But I think, yeah, given the gap in the US market for beef protein, particularly, I think even if

04:28we have a bit of an extended dry spell here in the south, it's probably still going to carry

04:33our pricing reasonably well. And I expect pricing to continue to climb as we head towards winter.

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