This report offers a comprehensive overview of the global beef industry and Australia’s trade relationship with the world.

SummaryThe long-term outlook for global beef consumption is largely positive, underpinned by growth in populations and household wealth in emerging markets, particularly throughout Asia. Australia produces only 4% of global beef but accounts for around 17% of world trade, and has consistently been one of the top three global exporters for several decades. While 2020 was a particularly challenging year, characterised by the far-reaching impact of COVID-19 and tight levels of Australian livestock supply, many opportunities for targeted growth remain.

Global population Households earning* >US$35k/year Australia’s share of global exports

7.790billion

in 2020

8.104billion

in 2024

311.4 millionin 2020

396.1millionin 2024

Brazil – 22% Australia – 17% US – 12% India – 12% Argentina – 8% NZ – 6% EU – 6% Canada – 5% Rest of world – 13%

Source: Fitch Solutions, 2020 estimate, 2024 forecast Source: Fitch Solutions, 2020 estimate, 2024 forecast Source: IHS Markit, 2019-20

*includes: EU, Egypt, Bahrain, Iran, Jordan, Kuwait, Qatar, Saudi Arabia, UAE, US, Canada, Mexico, Japan, Korea, China, Australia, ASEAN, Taiwan and Hong Kong. Disposable income = earnings after taxes and social security charges.

Global opportunities for Australian beef• African Swine Fever (ASF) has had a significant impact on

the global meat market, particularly in growing China’s import demand across all proteins, including beef.

• Growing household incomes within emerging markets are providing many consumers with the ability to increase the volume of their protein consumption, while those shifting into the middle-upper income brackets are typically improving the quality of meat they consume.

• In developed markets, consumers are seeking differentiated segments across the beef category, such as certified breeds like Angus or Wagyu, and are exploring both grassfed and grainfed beef.

• Expansion and modernisation of foodservice industries within developing markets.

• Growing consumer interest and awareness of provenance, sustainability, animal welfare, food safety and traceability provide messaging opportunities for Australian brands and underpin ambitious, industry-wide programs for Australia to further differentiate.

Global challenges for Australian beef• Australian beef production is expected to remain tight in

2021, as the nation enters a herd rebuild phase following a period of elevated drought-induced turn-off in 2018 and 2019.

• COVID-19 has created a multitude of challenges that will likely have flow-on effects in the coming years. Key issues through 2020 were disruptions to foodservice channels and supply shocks created by logistical and processing barriers, with few countries exempt from the impacts of reduced tourism, higher unemployment levels and constrained consumer spending.

• Rising production and export volumes from key competitors, such as the US and Brazil, will continue to intensify competition in coming years, particularly within Asian markets.

• The high price of beef compared to competitor proteins, such as chicken and fish, will weigh on category growth in economically-constrained markets.

• There is growing consumer interest in alternative proteins, with a number of meat substitutes becoming more embedded in the mainstream marketplace and competing for market share with beef, albeit off a low base.

GLOBAL MARKETS STRATEGIES CONSULTATION #1 Global beef industry and trade report

MLA Global beef industry and trade report February 2021 1

Australian beef exports – volume Australian beef exports – value Australian beef exports – cuts

Chilled grain – 14% Frozen grain – 13% Chilled grass – 13% Frozen grass – 61%

Frozen – 62% Chilled – 38%

Manufacturing – 34% Brisket – 10% Blade – 7% Chuck roll – 6% Silverside/outside – 6% Shin/shank – 4% Topside/inside – 4% Other – 30%

Total 1.2 million tonnes swtSource: DAWE 2019-20 tonnes swt

Total A$11.26 billionSource: IHS Markit, 2019-20 Source: DAWE 2019–20

Share of global beef production Global meat consumption – million tonnes

US – 20% Brazil – 15% EU – 12% China – 11% Argentina – 5% India – 4% Australia – 4% Mexico – 3% Rest of world – 26%

Pork

106120

131 137

Poultry Beef Sheepmeat

71 73

16 16

Source: OECD-FAO Agricultural Outlook 2020 estimate 2020 2024

Source: OECD-FAO Agricultural Outlook 2020 estimate

Major impacts of COVID-19The impact of COVID-19 has been multi-faceted and far-reaching, requiring swift adaptation and flexibility to navigate the multitude of challenges. While the majority of global industries have grappled with the effect of COVID-19, the agriculture sector has adapted and performed well, highlighting the resilience of the sector.

Trade and logisticsCOVID-19 has greatly impacted beef supply chains, with logistical barriers challenging operations across the world. A combination of spreading COVID-19 cases and social distancing measures have impacted the processing industry, with operational disruptions on production volumes for many suppliers. Trade has been impaired as disruptions have led to port bottlenecks and congestion, slowing the turnaround of refrigerated shipping containers. Air freight has also been impacted, with disruptions to typical flight paths constricting this form of transport and creating additional costs.

Foodservice and tourismThe multi-layered impact of COVID-19 has prompted some significant shifts in consumer purchasing behaviour. The foodservice sector has been one of the most impacted industries, with wide-scale shutdowns and operating restrictions across most markets. Operators in the foodservice sector that pivoted to takeaway or delivery models were able to weather the COVID-19 storm more successfully. With the reduction in international travel, this has also contributed to the slowdown of the foodservice industry worldwide.

RetailRetail meat sales have performed well off the back of the decline in foodservice activity, with consumers spending more time cooking at home. There has been a growing consumer interest in country of origin, driven by a preference for food choices promoting nutrition, immunity and overall health.

Economic impactsCOVID-19 has profoundly disrupted global economic growth, with few countries immune to the impacts of reduced tourism, higher unemployment levels and constrained consumer spending. While the majority of Australia’s top beef markets fell into recession in 2020, all of the top 15 markets are forecast for GDP growth in 2021, according to the International Money Fund.

Global economic growth projections

GD

P %

cha

nge

(rela

tive

to p

revi

ous

year

)

Aust

ralia

Cana

daCh

ina

Hon

g Ko

ngIn

done

sia Iran

Japa

nKo

rea

Kuw

ait

Mal

aysia

Philip

pine

sPN

GQ

atar

Saud

i Ara

bia

Sing

apor

eTa

iwan

Thai

land

UAE

UK

US

-10-8-6-4-202468

10

2020 2021 Source: IMF, World Economic Outlook Update, October 2020

While global markets continue to face uncertainty from COVID-19’s economic impacts, international demand for Australian red meat remains buoyant. The global ‘mega-trends’ of growth in population and disposable incomes, combined with the continuing impact of ASF on global pork supply and demand, underpin a strong opportunity for Australian beef. However, there is potential for a long-term rise in protectionism (an economic policy of restricting imports from other countries) which could result in a renewed emphasis on food security and a focus on increasing local food production.

MLA Global beef industry and trade report February 2021 2

GLOBAL CONSUMPTION Global beef consumption is currently forecast to grow at an average annual rate of 0.6% through to 2024 (OECD-FAO 2020), supported by population and income growth, primarily in Asia. This growth is expected to equate to an additional 1.8 million tonnes of beef being consumed across the globe by 2024. However, beef’s share of global meat consumption is expected to decline slightly over that period to 21% (down 0.9% relative to 2020), particularly due to the rebound of global pork production as ASF steadies, the gradual uptake of alternative proteins and shifting consumer perceptions towards health and sustainability.Beef consumption levels vary across the world but are often determined by a combination of factors, including:• economic growth and consumer purchasing power• population growth and demographics• consumer dietary preferences associated with culture and

religion• a history of local meat production and consumer familiarity • competition from other proteins and relative prices• trade policies and market access• resilience of supply chains • urbanisation and cold chain development. Increasingly, consumption in developed markets is also guided by health perceptions, environmental considerations and animal welfare claims. These consumer trends have supported the rise of the alternative protein industry, which will play a growing role in the protein landscape in the years to come.

Beef consumption forecasts

milli

on to

nnes

cw

e

0

5

10

15

20

25

30

OceaniaEuropeNorth AmericaAsiaLatin AmericaAfrica

Mostly developing markets Mostly developed markets

2020 2023 2026 forecast 2029 forecastSource: OECD-FAO 2020 Agricultural OutlookMiddle East and North Africa (MENA) split across Africa and Asia

Global beef prices have been growing at a faster rate than both chicken and pork. Relative to an index of 2002-2004 prices, global beef prices have more than doubled, while poultry and pork increased just 51% and 19% respectively (FAO meat price index). This consistent divergence in price, underpinned by substantial efficiency gains in the poultry and, to a lesser extent, pork industries, has contributed to the share of consumption shifting away from beef towards cheaper proteins.Depending on the stage of economic development of the country in question, the challenges and opportunities across consumer profiles differ. For instance, demand in many mature markets is shifting focus from quantity to quality, as many high-income countries are reaching saturation levels of per capita meat consumption and consumer preferences leading to a diversification of protein sources. Differentiation is a key factor which will become increasingly important for consumers in developed markets, as they seek flavour and experience over volume.

Household income growth within developing countries is expected to drive further demand for meat, as increasing disposable incomes open up a range of retail and dining choices for consumers. Starting from a lower per capita base, developing countries are forecast to account for 77% of additional world consumption growth over the next five years, largely due to population growth, urbanisation and increasing incomes.

Number of households earning over US$35,000

milli

on h

ouse

hold

s

0

200

400

600

800

100

120

Viet

nam

Philip

pine

s

UAE

Saud

i Ara

bia

Indo

nesia

Taiw

an

Aust

ralia

Kore

a

UK

Japa

n

Chin

a

US

5%

106%27% 19%

22%9%

23% 192% 46% 26% 82% 139%

2020 2024f Source: Fitch SolutionsData labels show percentage growth of 2024 relative to 2020* Disposable income = earnings after taxes and social security charges.

Global consumer trendsBeef has a long history of consumption in many markets around the world and constitutes a major dietary component in some countries. Beef encompasses a wide range of products, from low value offal and manufacturing product through to highly marbled premium Wagyu, all of which play a unique role depending on the country and consumer segment.In many western countries, beef is considered the ‘prime’ meat, viewed as the most superior and delicious, and often considered a family favourite. However, the role of beef differs in many Asian and Middle Eastern countries, where proteins such as pork (in Asia), seafood, chicken and sheepmeat (in the Middle East) play a larger role in consumer diets.A number of trends around the world that favour both grassfed and grainfed beef – as well as other points of difference such as breed and raising claims – provide Australia’s broad production system with numerous opportunities to target growing segments.

For a detailed of overview of Australia’s primary beef markets, visit: mla.com.au/market-snapshots

MARKET SNAPSHOT l BEEF & SHEEPMEAT

MLA MARKET SNAPSHOT BEEF AND SHEEPMEAT JAPAN September 2020 1

Japan Japan is geographically a small country, with less than one tenth of the population in China. Yet the market has a high number of comparatively affluent households and sophisticated supply chain infrastructure. A balanced diet based on variety, quality and good flavour is highly important for Japanese consumers, and coupled

Japan is one of the largest export destinations for Australian beef, alongside the US and China. It is also the largest market for grainfed beef, taking close to half of total grainfed exports.

Japan is a consistent buyer of Australian sheepmeat and is the largest chilled lamb customer in Asia. In 2019–20, total sheepmeat fell 3% on year-ago levels, largely due to a decrease in supply.

Australian beef exports – volume5

Australian beef exports – value6

Australia’s share of beef imports7

Australian beef offal exports6

11%

33%

40%

16% Chilled grass Chilled grain Frozen grass Frozen grain

57%

43% Chilled Frozen 46%

Australia Other

countries

A$283 million Key outlet:

(table-top BBQ)

Total 284,023 tonnes swt Total A$2.42 billion

Australian sheepmeat exports – volume5

Australian sheepmeat exports – value6

Australia’s share of sheepmeat imports7

Major outlet of Australian sheepmeat 8

42%

28%

29%

1%

Chilled lamb Frozen lamb Chilled mutton Frozen mutton 72%

28%

Lamb Mutton 64%

Australia Other

countriesin Hokkaido

(Sheepmeat BBQ)

(Northern island of Japan)

Total 13,793 tonnes swt Total A$164 million

Population1

126million

Chi

naJapa

n

ASEA

N

124 million by 2024(-1% from 2021)

1,444

674

Aust

ralia

26

with the country’s low food sufficiency rate, Japan is a major importer of various food products from global suppliers, including beef. While the country’s economic growth is subdued compared with many neighbouring markets in Asia, Japanese consumers have a strong interest in healthy living, and will continue to demand high volumes of quality imported proteins, such as Australian red meat.

Household number by disposable income2

US$35,000+ US$75,000+

Japa

n

Aust

ralia

ASEA

N

Japa

n

Chi

na

ASEA

N

24.4million

10.6 5.13.8million

3.31.4

Chi

na

24.2

Aust

ralia

5.9

7% of total households(9% by 2021)

44% of total households(52% by 2021)

Meat consumption per capita3

39%

0.1%19%

42% 55kg

Grocery spend4

A$ 5,851per person/year

Data source for charts: 1Fitch Solutions 2021, ASEAN = Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam, 2Fitch Solutions 2021 (disposable income = earnings after taxes and social security charges), ASEAN = Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam, 3Fitch Solutions, GIRA (per person per year in cwt excluding fish/seafood) 2020 and 2021, 4IGD 2021 (defined as the total annual grocery retail market turnover in a given year, divided by the population for the same year. Grocery retail market data excludes VAT/sales tax), 5DAWE (FY 2019–20), 6ABS/IHS Markit (FY 2019–20), 7IHS Markit (most recent 12 months due to data availability), 8MLA

MLA Global beef industry and trade report February 2021 3

World meat price indicesin

dex

(200

2–04

=100

)

50

100

150

200

250

300

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Beef Sheepmeat Pork Poultry

Source: FAO

There are several broad trends affecting beef consumption globally in both foodservice and retail channels, with growth in consumer demand for: • fresher and less processed offerings • more customised meals • more international cuisines • messaging relating to provenance and health (e.g. ‘grassfed’,

‘free from’, ‘natural’)• growth of e-commerce and different delivery methods• more convenient, on-the-go offerings • smaller but higher quality premium portions. Consumer perceptions of beef and competing proteins can also vary significantly from market to market. For instance, the economic development of a country influences typical consumer purchasing drivers, with developing countries focusing more on freshness and safety, while developed markets focus on value and points of difference. Given the diversity of Australian beef, understanding consumer needs and what drives purchasing decisions in each market is essential.

Key motivators to purchase beef

Japan Safety Freshness Value

Korea Safety Natural Freshness

Saudi Arabia Halal Safety Natural

China Safety Natural Freshness

United States Freshness Natural Value

Indonesia Halal Freshness Safety

Malaysia Halal Safety FreshnessSource: MLA Global Consumer Tracker

The popularity of meat alternatives is growing and research indicates that as protein demand evolves in the future, traditional growth drivers may become more contemporary, such as dietary shifts for health and ethical reasons, government regulations, environmental constraints and technological advances. While traditional meat will dominate the protein mix for decades ahead, a growing proportion of the global protein shortfall is expected to be offset by emerging plant-based alternatives, lab grown proteins and expanding aquaculture production.

Global meat consumption: developed economies

milli

on to

nnes

cw

e

0

50

100

150

200

250

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

Beef Pork Poultry SheepmeatSource: OECD-FAO 2020 Agricultural Outlook

Global meat consumption: developing economies

milli

on to

nnes

cw

e

0

50

100

150

200

250

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

Beef Pork Poultry SheepmeatSource: OECD-FAO 2020 Agricultural Outlook

Major global markets

United StatesGlobally, the US has the highest number of households earning disposable incomes over US$35,000 and US$75,000 per year. This affluent consumer base, combined with high per capita beef consumption, means the country remains highly attractive and influential in the global protein trade landscape. Opportunities exist for Australian red meat to enhance its profile in the US thanks to growing demand from consumers for natural, healthy and environmentally sustainable products.The US is one of the largest global consumers of animal proteins, with the level of meat consumption near maturity. Going forward, the opportunity for growth within the beef category will be to increase export value through premium products like chilled grassfed beef, rather than through increased volume of conventional beef exports.

China China has transformed from being a minor import market in 2010 to the world’s largest imported beef market in 2020, with growth accelerated by the spread of ASF and the subsequent decline in pork production. However, China’s beef import expansion was underway well before the onset of ASF. It is expected that population and income growth across the country will continue to drive importation growth in the long-term.Chinese consumers consider beef a superior protein, making it a family favourite due to its high nutritional value and great taste. Barriers to more frequent consumption, apart from price, are driven by perceptions that beef is more difficult to prepare, less fresh and less tender compared to other proteins. In urban upper middle-class households, there is increasing exposure to western-style steaks, sausages, pasta dishes and burgers, both at home and via foodservice.

MLA Global beef industry and trade report February 2021 4

Annual beef consumption per capitakg

/per

son

(reta

il wei

ght)

0

5

10

15

20

25

30

US

Aust

ralia

Cana

da

Kore

a

UK EU

Viet

nam

Japa

n

Mal

aysia

Chin

a

Saud

i Ara

bia

Philip

pine

s

Indo

nesia

Source: OECD-FAO 2020

JapanA balanced diet based on variety, quality and good flavour is very important for Japanese consumers, and coupled with the country’s low food sufficiency rate, Japan is a major importer of various food products from global suppliers, including beef. While the country’s economic growth is subdued compared with many neighbouring markets in Asia, Japanese consumers have a strong interest in healthy living, and will continue to demand high volumes of quality imported proteins. Despite flat population growth, beef consumption is projected to increase in Japan due to growing per capita consumption.Beef is considered the most premium protein with good taste, underpinned by a strong emotional connection and a unique flavour experience. Japan’s restaurant sector is one of the most

developed in the world in size and sophistication, with a diverse range of global cuisines and price points available to consumers.

South-East AsiaThis dynamic and fast-growing region is diverse in population size, economic status and cultural/ethnic background. Improving household incomes and changing consumer tastes in the region are driving a rapid rise in red meat consumption, particularly in urban cities. South-East Asian consumers associate beef with superiority and good taste, which typically drive them to pay a premium for it. Consumers also have positive perceptions of imported beef products, with ‘premium quality’ and ‘better taste’ being commonly perceived benefits.

MENA (Middle East and North Africa)MENA is a large, complex region with many varied consumer markets. MENA consumers have traditionally preferred leaner meat. However, consumption and spending on beef is forecast to increase across almost all MENA markets in the next several years as more affluent consumers come to appreciate the benefits of premium quality beef, combined with ongoing urbanisation and westernisation. The region has a comparatively young population – all MENA-10 countries, except Kuwait, have over half of their population aged under 35 years.

GLOBAL SUPPLY Global beef production was estimated to have fallen by 2% in 2020, largely due to the contraction of Australian beef supplies and the impact of COVID-19 on the Indian meat processing industry. In 2021, the United States Department of Agriculture (USDA) has forecast global production volumes to lift to 61.5 million tonnes carcase weight equivalent (cwe), an increase of 2% on 2020 levels. Economic recovery across the globe is expected to support the growth of beef production, particularly for those nations that have suffered from disruptions caused by COVID-19.

Global beef production

0–499 500–999 1,000–1,499 1,500–1,999 2,000–2,499 2,500–2,999 3,000–3,499 3,500–3,999 4,000+Source: USDA, 2020 volumes, thousand tonnes cwe

The types of production systems and supply chains vary greatly around the world. Beef production in NZ, the EU and India is mainly a by-product of large dairy industries. However, at one extreme, New Zealand is almost entirely export focused, while the EU is domestically oriented.

For the latest outlook on Australian export markets, visit: mla.com.au/prices-markets/overseas-markets/

MLA Global beef industry and trade report February 2021 5

Meanwhile, most producers in North and South America rely on beef cattle genetics for production, but the former primarily finishes Bos taurus cattle on grain and the latter a mix of Bos taurus and Bos indicus cattle predominantly on grass. Uruguay’s beef industry is similar to Australia’s, with Bos taurus genetics, traceability systems and an export focus, however, it remains a much smaller competitor in global markets and produces predominantly grassfed beef.

AustraliaFollowing on from a sustained period of drought from 2018–19, notable levels of rainfall in 2020 have resulted in increased pasture availability, predominantly across the eastern states. After several years of high cattle turn-off and the cattle herd sitting at historically low levels, this has created the opportunity for producers to rebuild numbers. Driven by the ongoing dry conditions, the Australian cattle herd dipped to a 20-year low in 2020, sitting below 25 million head. Beef production is expected to tighten in 2021, as producers across the country look to rebuild herd numbers, assuming seasonal conditions continue to support a rebuild phase. The Australian feedlot sector continues to grow in an effort to mitigate periods of climate variation and enable a consistent supply of beef, regardless of conditions. This ensures Australia can continue to produce high volumes of quality beef year-round and a steady supply of product to both domestic and international markets. The quality and safety of Australian beef is guaranteed through an assortment of traceability systems, underpinning Australia’s competitive edge. The main systems underpinning Australian beef are the:• National Livestock Identification System (NLIS)• Livestock Production Assurance (LPA)• National Vendor Declaration (NVD)

For the latest outlook on Australian traceability systems visit: integritysystems.com.au

Through these systems, Australia is able to protect the disease-free status of Australian red meat, as well as maintain Australia’s image as a clean, safe and natural producer and exporter of red meat. The consistent eating quality of grass and grainfed beef is guaranteed through the Meat Standards Australia (MSA) grading program, which has been developed to improve the supply of consistently high quality beef to the consumer. A record number

Production mixBe

ef c

attle

% o

f cow

her

d

Export % share of production

ArgentinaChina

Canada

Brazil

India

Russia

Mexico

Uruguay

US

New Zealand

EU

Australia

0 20 40 60 80 1000

20

40

60

80

100

Source: USDABubble size reflects 2020 production

of cattle went through this system in 2019–20, comprising 46% of the national kill. The MSA system takes into account all factors that affect eating quality from paddock to plate, and is recognised as a world-leading eating quality program.

For the latest outlook on Australian beef supply, visit: mla.com.au/cattleprojections

United States The US is the world leader in beef production, utilising extensive grain feeding systems that enable quick weight gain and efficient outputs. US cattle are among some of the heaviest in the world, and impressive economies of scale allow the US to compete strongly with other global producers where land, labour and cattle are substantially cheaper.

Global carcase weights

Aver

age

carc

ase

wei

ght (

kg/h

ead)

0

50

100

150

200

250

300

350

400

Cana

da

Uni

ted

Stat

es

Mex

ico

Euro

pean

Uni

on

Aust

ralia

Uru

guay

Braz

il

Arge

ntin

a

Chin

a

Indi

a

Source: USDA

The US remains a major competitor for Australia and has a strong presence within some of Australia’s largest markets, Japan and Korea, while also expanding slowly into China following the US-China trade agreement signed in early 2020. The US can produce high quality beef, with grainfed cattle of Bos taurus genetics making up the majority of production, while developed cold chain infrastructure and modern slaughter facilities provide the capability to export chilled product.

MLA Global beef industry and trade report February 2021 6

US beef production/herd size

milli

on h

ead

1990 1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

e20

21f9.0

9.5

10.0

10.5

11.0

11.5

12.0

12.5

13.0

80

85

90

95

100

105

milli

on to

nnes

cw

e

Beef production (LHS) Herd size January (RHS)

Source: USDA

The US cattle herd follows a fairly consistent cyclical pattern, and with the peak now likely to be reached in 2021, a contraction is expected in the coming years, underpinned by reduced cow-calf profitability, increased female slaughter and an eventual smaller calf crop. US beef production is forecast to increase in 2021, as a result of a greater availability of cattle and heavier slaughter weights, due in part to COVID-19’s impact on processing capacity. This increase in production will likely result in US export volumes lifting, increasing competition for market share across international markets.

Regional beef production growth (2009–2029f)

milli

on to

nnes

cw

t

North America

Europe

Oceania

Africa

Latin America

Asia

2009

f2029

2019

0

5

10

15

20

25

Source: FAO-OECD 2020 Outlook

BrazilBrazilian beef production is expected to continue growing in coming years, underpinned by a slowly expanding herd, the opening of new land for grazing, greater availability of slaughter cattle and strong international demand. Brazil lacks the efficiency of Australia in producing beef, but has been catching up in recent years as it adopts new practices and technologies. Compared to Australia and the US, the Brazilian herd is less productive, giving it greater ability to lift future production from efficiency gains rather than from greater resource use. Both investment and modernisation have improved production efficiency, with Brazil increasing beef production by 3.7 million tonnes (or 55%) carcase weight (cwt) since the beginning of the millennium. Brazil has been a key contributor to global production growth in recent years, a trend that is set to continue in 2021. Beef production in Brazil is expected to benefit from an improving domestic market and enduring demand from China, MENA, and emerging demand from South-East Asia.The Brazilian herd is predominantly comprised of Bos indicus breeds finished on pasture and destined for the commodity beef trade. However, Brazilian livestock operations are increasingly using an ‘industrial cross’ of local Bos indicus Nelore cattle with US/Argentine Angus genetics. This industrial cross combines the feed efficiency and meat quality benefits derived from Angus cattle with the heat and tick tolerance found in the Nelore breed.

Brazil’s grain feeding capabilities are building. In 2019, about 6 million cattle were finished on grain – almost doubling from a decade prior, but dwarfed by the 40 million processed overall. While feedlots currently only account for approximately 10% of Brazil’s meat production, this is expected to double over the next five years. This shift in production focus could soon see Brazil challenge Australia and the US in grainfed beef export markets.

Beef production and export forecasts 2021

Perc

enta

ge e

xpor

t gro

wth

Percentage production growth

-6 -4 0 2 4 6 8 10-2

-10

-5

0

5

10

15

20

Argentina

Australia

Canada

EU

India

New Zealand

BrazilUS

Source: USDA Foreign Agriculture Service, MLA estimates (Australia)Note: Bubble size shows expected 2020 export volume. Percentage growth shows 2021 forecast relative to 2020 levels.

Argentina Argentina produces a mix of commodity and high-quality beef, with the herd made up of predominantly Bos taurus genetics. Grainfed cattle account for close to a third of Argentinian cattle turn-off. Argentinian beef exports in 2021 are expected to contract slightly as production volumes are forecast to tighten after a period of elevated slaughter through 2020 on the back of dry conditions across the country. Argentina’s beef export situation improved substantially in 2015 following the removal of a 15% export tariff, export restrictions and currency controls overvaluing the peso. However, recent years have seen a surge in inflation and a collapse of the Argentinian peso. The combination of these factors has lent support to the commercial viability of exporting beef rather than selling it locally, resulting in the proportion of Argentinian beef which is exported lifting from 7% in 2015 to 25% in 2020. Argentinian beef has become very competitive in the global market. China became a major destination for Argentinian beef in 2020, with shipments doubling relative to 2019 and the market accounting for almost three quarters of exports. The price of cattle in Argentina is substantially lower than prices in other countries, such as the US and Australia, which creates a significant competitive advantage for its product.

European Union (EU)The EU is a significant producer of beef, but most production is derived from a dairy-based herd and consumed domestically. After an increase from 2013–19 due to a restructuring of the dairy sector, EU beef production began to decline in 2020, and is expected to continue falling long-term until 2030. Nevertheless, in 2020, beef production was estimated at 7.8 million tonnes cwe – almost four times that of Australia. France holds the position as the largest beef producer in the region, accounting for 17% of EU production in 2019, followed by Germany (13%) and the UK (11%). In 2020, domestic beef production was estimated to account for 95% of total EU beef consumption.

Brazilian Bos indicus Nelore cattle

MLA Global beef industry and trade report February 2021 7

The region is a high-cost producer of beef, remaining heavily protected from the global market while being subsidised through the EU Common Agricultural Policy. Regardless of the expected decline in production, beef exports are predicted to increase by 8% in 2020, with newly obtained access into China for some member states combined with increasing demand from existing partners in the Philippines, Bosnia and Israel, and sluggish domestic demand. Irish beef exports, currently dominated by the UK market, remain sensitive to the Brexit outcome, and may be directed into new markets in coming years. The majority of beef production in the EU is traded internally through Europe, with much of the remainder destined for the UK.

China China is the world’s third largest beef producer. By global standards, China’s production system is characterised by smaller-scale producers and abattoirs. An inability for local production to keep up with increasing demand has led to a surge in imports in recent years. China’s domestic beef production shortfall is expected to continue expanding over the next five years, with short-term fluctuations in local production – which still accounts for over 70% of consumption – likely having a significant impact on import requirements.

India Indian buffalo meat (IBM) is a commodity product that sets the world price floor. IBM is a by-product of the large Indian dairy industry, made up of many smallholders. India does not have FMD-free status, restricting access to many countries. Therefore, it predominantly exports to developing and price sensitive markets in South-East Asia and the Middle East. IBM production expanded rapidly throughout the 2000s as the dairy sector grew and buffalos began being utilised for meat, however, it has slowed recently. While a massive industry, IBM production remains sensitive to domestic politics, with some Hindu groups emboldened by the Modi government calling for its outright ban. Approximately 40% of IBM production is consumed domestically, predominantly by India’s Christian and Muslim populations. India’s agriculture industry was hit particularly hard by the consequences of COVID-19. Contractions in processing capacity and logistical complications across the industry meant that exports of IBM collapsed in the first half of 2020. While India’s agricultural infrastructure isn’t as developed as that of some other beef producing nations, the underlying potential of the country means the Indian government has prioritised

developing the agriculture sector due to its importance to economic growth.

Australian cost of production While one of the most efficient countries to breed and grow out calves – largely due to high levels of broadacre labour efficiency and economies of scale – Australia is less competitive in finishing cattle relative to other major producers (the result of high costs of store cattle, land, labour, regulatory requirements and feed). High on-farm costs are compounded by additional expenses in the supply chain, particularly in processing cattle, where Australia’s costs are twice that of Brazil’s and 24% more than the US’s (AMPC). With a high reliance on exports, Australia also faces greater freight and supply chain costs, as well as tariffs in some markets, compared with other major producers servicing similar domestic markets.Prior to 2015, cattle prices in Australia closely tracked with South American prices on a currency-adjusted basis, but the separation in markets following the 2014–15 Australian drought has not reversed, partly due to relatively tight supplies of finished cattle in Australia and the Brazilian real and Argentine peso coming under significant downward pressure in recent years, with both dropping dramatically in 2019.While elevated prices are positive for Australian producers, high slaughter and supply chain costs mean that Australia must continue to focus on improving efficiency and increasing the value proposition for consumers in order to remain competitive.

Global cattle prices

US¢/

kg liv

e w

eigh

t

2012 2013 2014 2015 2016 2017 2018 2019 2020100

150

200

250

300

350

400

US Australia Brazil Argentina Uruguay Paraguay

Source: IPCVA (Argentina); MLA’s NLRS (Australia); Esalq/Cepea (Brazil); USDA/Steiner Consulting Group (US). Finished cattle (steer) specifications vary between indicators.

Cattle slaughter costs* On-farm cost of finishing cattle**

A$/h

ead

Australia US BrazilArgentina AustraliaCanada US BrazilArgentina0

50

100

150

200

250

300

350

400

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

100

200

300

400

500

US¢

/kg

Labour Utilities  Certification Other A$/kg cwt (RHS)

Maximum Average Minimum

Source: *AMPC (Analysis of regulatory and related costs in red meat processing) 2015-16 typical operating slaughter costs and excludes cost of cattle. **agri benchmark 2018 typical farm/feedlot cost of finishing cattle, includes the cost of store cattle.

For more information on Australia’s comparative cost of production, visit:

ampc.com.au/2018/10/Analysis-of-Regulatory-and-Related-Costs-in-Red-Meat-Processing

mla.com.au/prices-markets/Trends-analysis/agribenchmark

MLA Global beef industry and trade report February 2021 8

GLOBAL TRADE AND DEMAND

Australian beef exports (2000–2020)

Japan

Indonesia

MENA

Other

SEA(exc. Indonesia)

2000

2020

2015

2011‘000

tonn

es c

wt US

China

Korea

050

100150

200250300350400450

Source: DAWE

Competitive landscape The competitive landscape for the global beef market has evolved over the decades. While export volumes are ten-fold what they were in the 1960s, Australia has consistently maintained an important role within the global marketplace, and remains one of the three largest beef exporters.

Competition in Australia’s major marketsm

arke

t sha

re (%

)

Imported beef market

More commodityMore premium

USJap

anKo

rea

Canad

aTai

wan EUChin

a

Philip

pines

Indon

esia

Malaysi

aMEN

A

0

20

40

60

80

100

Supplier: Australia Argentina Brazil Uruguay US Canada Mexico India NZ Other

Source: IHS, data is for FY2019-20

The US is Australia’s single largest export competitor due to its access to high value markets, large scale and exportable surplus, and ability to supply large volumes of high quality chilled product. The US exports significant volumes of beef to Japan and Korea and maintains a minor presence within the Greater China and South-East Asian markets. Competitive pressure from the US is set to increase due to an expanding production base and market access improvements. Some of these access improvements include: • In 2019, the US came to an agreement with the EU to ‘ring-

fence’ a portion of the EU High Quality Beef (HQB) grainfed quota (shared with Uruguay, Argentina and Australia), which provides the US with exclusive access to 18,500 tonnes swt of the quota, which will increase incrementally to 35,000 tonnes swt over a seven-year phase-in period.

• At the start of 2020, the US reached an agreement with Japan to bring tariffs on US beef in line with signatories to the Comprehensive and Progressive Trans-Pacific Partnership, but it will operate within its own smaller safeguard.

• The US-China Phase One trade agreement also entered into force in January 2020, but little trade is yet to materialise.

The bulk of beef consumption growth over the past decade has been in the developing world, particularly Asia, with forecasts for the next decade indicating a similar trend. However, surplus production remains centred in North and South America and Australasia. These production and consumption imbalances drive global trade. Additionally, reduced tariffs and sea freight costs, improved cold chains and the development of governing institutions have supported the growth of the global beef trade over the past two decades. In 2020, 17% of beef production was traded internationally – higher than poultry, pork and sheepmeat.

Top beef exporters and importers

Aust

ralia

Braz

il

US

Arge

ntin

a

Indi

a

NZ

EU*

Can

ada

Taiw

an

Russ

ia

UK*

Hon

g Ko

ng EU*

Sout

h Ko

rea

Japa

n

US

Chi

na

US$

billi

on

0

2

4

6

8

10

12Top exporters Top importers

Source: IHS Markit, FY2019–20 *EU only includes external trade but UK includes trade within and outside the EU

Australia exports approximately 75% of beef production – far more than most but comparable to New Zealand and Uruguay – and as such, is heavily exposed to currency fluctuations, the health of the global economy and market access changes. Australia is a major player when it comes to exports, particularly in providing high value product backed by integrity and quality assurance systems. For FY2019–20, Australia was the beneficiary of a soft Australian dollar that contributed towards making it the most valuable year for beef exports on record. The Australian outlook is for tight supplies in 2021, with beef exports forecast at approximately one million tonnes shipped weight (swt). Diminished supply will intensify competition for market share across export markets. Forecast growth in beef production from the US will place pressure on Australia’s high value export markets, while production growth in Brazil and India will lead to further competition for Australian manufacturing beef and live cattle exports to China, South-East Asia and the Middle East and North Africa region. Strategically targeting high value markets will continue to be a priority for Australia at a time when domestic supplies are expected to tighten. While production trends paint part of the picture, market access changes, such as the increasing number of South American plants gaining export approval for China, could have a far greater competitive impact on Australian beef in some markets.

MLA Global beef industry and trade report February 2021 9

South American suppliers Brazil and Argentina have emerged as major trade competitors in the past decade. They both have large production bases to draw exports from, and in recent years favourable shifts in exchange rates and the poor performance of their domestic markets have promoted the appeal of exporting meat.

Global top three imported beef markets

‘000

tonn

es s

wt

0

500

1000

1,500

2,000

2,500

Greater China

China

Hong KongTaiwan

US Japan South Korea Russia

Source: IHS, data is for FY2019-20

With South American trade ramping up in recent years, China has been a key target market for expansion. After the sudden emergence of the ASF-induced pork deficit in China in 2019, trade flows between these nations advanced rapidly, with Chinese officials promptly approving dozens of South American

plants for exports. Almost half of all the beef exported from Brazil in 2020 was sent to China, representing a remarkable shift in focus from last year when China accounted for 24% of Brazilian beef exports. Currency movements have also had a profound impact on the affordability of South American exports. The Brazilian real depreciated from 2018 through 2020, finishing 2020 near an all-time low of US$0.19, making Brazilian beef more affordable on the global market.South American suppliers may soon benefit from the EU-Mercosur trade agreement and the ear-marked 99,000 tonnes of access provided to the EU market, however, this agreement is yet to be ratified and political appetite may be waning on both sides to finalise the deal. Additionally, in 2019 Brazil was permitted 50,000 tonnes of access into Indonesia, which will potentially impact Australian cattle and beef shipments if fully realised. However in 2020, only 4,000 tonnes swt was sent. Other exporters, such as New Zealand and Canada, compete in similar markets and segments to Australia, but opportunities to expand exports remain limited by supply. New Zealand is heavily reliant on trade to the US and China, with smaller trade volumes flowing into a variety of other destinations. Canada is the leading supplier of beef to the US and also supplies sizeable volumes to Japan. While India is an exporting powerhouse, it purely supplies IBM to South-East Asia and the Middle East.

Evolution of China beef imports

201420132012 2015 2016 2017 2018 2019 2020

milli

on to

nnes

cw

e

0

50

100

150

200

250

ASF discovered in China, August 2018

Brazil Argentina NZ Uruguay Australia US OtherSource: IHS, China Customs

Beef trade growth over time

milli

on to

nnes

cw

e

0

20

4

6

8

10

12

1960 1961

1962

1963

1964

1965

1966

1967

1968

1969

1970 1971

1972

1973

1974

1975

1976

1977

1978

1979

1980 1981

1982

1983

1984

1985

1986

1987

1988

1989

1990 1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Creation of WTO

Brazil Australia India US Other Source: USDA

MLA Global beef industry and trade report February 2021 10

The influence of African Swine FeverASF has quickly spread throughout Asia’s largely informal and fragmented pork industry. The disease is transmittable when pigs come into direct contact with infected animals, indirect contact with contaminated objects or are fed contaminated pork products. The disease has a near 100% mortality rate and once it makes its way into a pig herd, culling the pig population within the immediate area is currently the best method of defence. The transmission of the disease has been accelerated by wild pig populations carrying the disease across country borders. Vietnam, Cambodia, Laos, Myanmar, Mongolia, Indonesia, East Timor, Korea and the Philippines have all reported cases of ASF since the onset of the outbreak in China in 2018.

Distribution of ASF

Current unresolved disease eventSource: World Organisation for Animal Health

ASF continues to have a large influence on global markets, with world pork production in 2020 estimated to be down 18% on 2018 levels (prior to the spread through Asia). While pork exports from the US, Canada and Brazil lifted substantially in response to the supply shortage, this wasn’t enough to cover the deficit. In China, price inflation across meat categories occurred as demand hugely outstripped available supply. However, prices have eased in the latter part of 2020 as pork production begins to recover. In November, the China retail pork price was up by 141% year-on-year, while chicken, beef and sheepmeat were up 28%, 24% and 22%, respectively. While ASF-affected countries have sought to prevent further outbreaks by utilising biosecurity measures to contain the virus, its highly infectious nature makes all containment challenging. In 2020, Chinese pork production was estimated to be down 30% on 2017 levels, with the breeding herd down approximately 50% for the same period. Based on these figures, the Chinese pork contraction has equated to approximately 17 million metric tonnes. There has not been sufficient meat traded globally, let alone out of Australia, to fully cover the immediate deficits in China, hence the rapid surge in demand. The bulk of major beef exporters all recorded unprecedented beef trade with China in 2020, while Australia was hampered by supply constraints.In response to the production deficit in China, pork export volumes from Spain, the US, Germany, Canada and Brazil all lifted sharply upwards to respond to the spike in demand. However, Germany, accounting for 17% of China’s imported pork in 2019, has since reported outbreaks of ASF. China subsequently paused all trade with Germany. This contraction in pork supply may provide further support for demand of other proteins, such as beef. In 2021, pork production in China is expected to grow for the first time since 2017, and as the Chinese swine herd recovers, this will likely curb the expansion phase of Chinese beef imports. Regardless, beef import volumes should remain at historical highs, given that Chinese pork production still remains well back on the typical pre-2020 volumes.

Chinese beef consumption

Impo

rted

beef

% o

f bee

f con

sum

ptio

n

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

f20

21f0

2

4

6

8

10

0

5

10

15

20

25

30

milli

on to

nnes

cw

e

ASF discovered in China, August 2018

Domestic production (LHS) Import volume (LHS) Import percentage (RHS)

Source: USDA

Chinese pork consumption

Impo

rted

pork

% o

f por

k co

nsum

ptio

n

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

f20

21f0

10

20

30

40

50

60

0

2

4

6

8

10

12

milli

on to

nnes

cw

e

ASF discovered in China, August 2018

Domestic production (LHS) Pork imports (LHS) Import percentage (RHS)

Source: USDA

Australia’s market access Trade is central to the ongoing viability of the Australian beef industry, and pursuing unrestrained entry to global customers remains critical. Australia’s access to export markets has generally improved over the past three decades, led initially by multilateral negotiations through the World Trade Organization, and more recently through a series of bilateral and regional free trade agreements. Reductions in non-tariff barriers have also been advantageous, however, many remain and have a noticeable impact on the cost of doing business. Australia has some of the best beef access globally due to trade reform initiatives and Australia’s reputation as a safe and reliable supplier, underpinned by a suite of industry integrity and animal health status systems. Australia now has free trade agreements with most major beef import markets including the US, Japan, Korea, China and Indonesia, which represented 84% of Australian beef and veal export value in 2019–20. The EU and Russia remain exceptions. The Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) has been ratified, providing improved access to Japan, Canada and Mexico. The Regional Comprehensive Economic Partnership (RCEP) – a multilateral agreement between ASEAN nations and China, India, Australia, New Zealand and Korea – came into force in November 2020. Additionally, new trade agreements with Indonesia, Hong Kong and Peru will facilitate trade and foster new opportunities. Australian trade negotiations with the EU commenced in June 2018, while negotiations with the UK began more recently in June 2020. While existing EU quotas will be split between the EU and UK as a result of Brexit, these negotiations represent the first opportunity in over 40 years to significantly reshape Australia’s red meat market access and provide opportunities to modernise the existing trade regime.

MLA Global beef industry and trade report February 2021 11

Recent political shifts have resulted in trade liberalisation becoming increasingly challenging. The increase in protectionism, led by the US’s approach to trade, does pose some risk, but Australian beef exports have largely avoided any blowback from the US-China trade war. However, trade tensions between Australia and China rose through 2020, which has resulted in China restricting imports of certain Australian agricultural products, including beef from certain plants. Australia’s favourable access to global markets is underpinned by strong animal health credentials, world-leading animal traceability and food safety systems and the fact it has never had a case of foot-and-mouth disease (FMD) or bovine spongiform encephalopathy (BSE). While Australia’s track record has sheltered the industry from competition, sanitary and phytosanitary measures imposed on other exporters due to various diseases continue to be wound back, and Australia is being increasingly exposed to a widening line-up of competitors across markets.

Live exportsAustralia is a leading long-haul exporter of live cattle globally, with trade links to supply chains in South-East Asia and the Middle East. Trade dynamics allow Australia to be the leading, if not sole, supplier of cattle to many countries, however, the high cost of Australian cattle presents a significant challenge in price-sensitive markets.Indonesia is the leading destination for Australian feeder cattle. Broadacre pastoral production in northern Australia is very suited to raising calves but less so to finishing cattle, while efficient Indonesian feedlots can utilise by-products from palm oil and other crops as low-cost feed options. A lack of cold chain infrastructure and the dominance of wet markets also supports the customer preference for freshly slaughtered cattle. Australian exports to Vietnam are based on similar fundamentals, however, the trade is predominantly made up of slaughter cattle, underpinned by constrained feedlot capacity and the market’s preference. Vietnam’s feedlot industry is an exception to this, with expected development in the coming years.

Major live export trade flows also exist across North America, primarily comprised of feeder cattle from Mexico and Canada destined for US feedlots, as well as finished cattle from Canada and the US crossing the border to be killed in either country. While Mexico has traditionally exported over one million cattle a year to the US, the synergies and sea freight infrastructure are not in place to ship large quantities to South-East Asia. Brazil, another major exporter of cattle, previously focused shipments within South America, however, its attention has since shifted to the Middle East, particularly Turkey. While Brazil’s FMD status is a barrier for exporting cattle to Indonesia, FMD is already an endemic disease in Vietnam (Australia’s second largest market) and Brazil is expected to be granted access in the near future, following sanitary agreements between the two countries in 2019. The EU also ships considerable volumes of cattle to markets across the Middle East, but no trade exists to South-East Asia.

Value of exports for major live cattle suppliers

US$

milli

ons

Trade to SEA & MENA

Trade withinNorth America

Trade to MENA

0

300

600

900

1,200

1,500

Australia Canada Mexico BrazilEU-28US

Source: UN Comtrade, 2019-20 exports

MLA Global beef industry and trade report February 2021 12

SUMMARY TABLE

Aus

tral

ia

NZ

US

Mex

ico

Can

ada

Bra

zil

Arg

entin

a

Uru

guay

Indi

a

Chi

na

EU-2

7

Cattle head (million head)* 24.6 10.2 94.4 16.9 11.2 244.1 54.5 11.5 303.1 91.4 77.1

Dairy % of cow herd** 8% 82% 23% 31% 22% 43% 8% 7% 100% 20% 65%

Cattle and calf slaughter (million

head)*7.4 4.4 33.3 6.4 3.5 39.9 14.1 2 34.8 48.5 24.0

Cattle exports (million head)* 1.1 0.12 0.29 1.5 0.64 0.29 - 0.12 - 0.02 0.96

Beef and veal production ('000 cwt)* 2,072 675 12,374 2,090 1,310 10,100 3,180 510 3,650 6,780 6,880

Total domestic consumption ('000

tonnes cwt)*567 79 12,610 1,870 1,048 7,600 2,385 160 2,600 9,515 6,570

Domestic share of production 27% 10% 89% 83% 62% 75% 75% 22% 71% 100% 95%

Per capita domestic consumption (kg/

person cwe)***22.0 16.7 38.0 13.0 25.5 35.4 53.5 56.3 0.8 6.1 14.9

Beef exports ('000 tonnes swt)† 1,214 460 931 255 363 1,658 602 295 914 - 454

Chilled % share of exports† 25% 7% 45% 87% 81% 11% 14% 10% 1% - 60%

Average export price ($US/kg)†† 5.86 5.26 7.06 5.71 5.85 4.45 5.19 5.56 2.85 - 4.82

Top three export markets†

China, Japan,

US

China, US,

Japan

Japan, South Korea, Mexico

US, South Korea, Japan

US, Japan,

HK

China, HK,

Egypt

China, Chile, Israel

China, US,

Neth-erlands

Vietnam, Malaysia,

Egypt-

UK, B&H†††, Switz-erland

Source: *USDA, MLA (Aust.) 2020 estimate; **USDA 2020 estimate; *** MLA (Aust.), FAO-OECD 2020 estimate converted to carcase weight equivalent, USDA 2020 estimate; †IHS, DAWE (Aust.) 2019-20 actual, ††IHS 2019-20 actual. †††Bosnia & Herzegovina

MLA Global beef industry and trade report February 2021 13