WHAT customer response have Australian beef exporters seen since the United States delivered on its threat to impose an additional 50 percent punitive tariff on imports from Brazil a week ago?

At first glance, it would appear likely that Australian exporters are now being swamped with US beef orders.

Brazilian beef is now considered to be ‘unviable’ as a source of supply into the US, given that it now attracts a total tariff of 76.4pc, through the new 50pc tariff on top of the existing 26.4pc since Brazil filled its US quota share back in January.

But that has not really happened, for a range of reasons set out below.

Will Trump flim-flam?

One large New South Wales beef processor holds the view that US beef customers are currently wary that US President Trump may again flim-flam on Brazil’s tariff imposition – at least for commodities like beef and coffee – which the US desperately needs or wants. Some 45pc of coffee consumed in the US is Brazilian in origin, and the typical American drinks a lot of coffee.

US meat importers were currently ‘pretty current’ with supply the NSW processor suggested, because despite the Brazilian beef tap being turned off, they did not want to get caught with large volumes of ‘relatively expensive’ Australian beef in coming months, should Trump decide to reverse his Brazil tariff decision.

Some mixed signals have also emerged from Australian beef exporters over exactly who is footing the bill for the 10pc US tariff now imposed on Australian beef exports to the US, as a result of recent Trump tariff measures.

One contact said a week before the new tariff was imposed on Australian beef exports, the market price in Aussie dollar terms for lean trimmings was A$11/kg.

“For a few days, we thought we were in with a chance, but a week later, we were getting $10/kg. The tariff was essentially passed back,” he suggested.

“At the time US customers were buying big loads from Brazil, and we had no other alternative,” he said. “We’ve been taking $10/kg and even less at times for the past two months.”

However he thought that would soon change.

“If Brazil cannot land meat into the US at a competitive price, sooner or later the US will need more Australian meat. But the issue is the Trump uncertainty – nobody there wants to pay more for Australian meat, if suddenly US tariffs on Brazilian beef are relaxed.”

“As everyone knows, Trump could change the rules overnight – and that has a lot of people in the US very nervous about buying forward. It could be very costly if the Brazil tariff comes off.”

One contact understands there are 2000 containers currently sitting between Brazil and the US that will escape the tariff rise.

A NSW processor said his company had anticipated a large jump in the price of Australian product into the US, on the back of the Brazil tariffs – to be more in line with US domestic beef pricing.

Currently a big deficit still exists between imported frozen Australian and NZ manufacturing beef, and domestic fresh supply. One recent set of numbers had US domestic 90s on US415c/lb, versus US345c/lb on imported.

“There’s definitely been an increase, but it hasn’t been anything like what we had been hoping for. It may still come over the next few weeks, especially if the Brazil tariff stays for a month or two.

“Up until today, the US has been able to play Australia off against Brazil. But that strategy is now closed, for the timebeing, at least.”

But any new business meant Australian beef not arriving in the US market until October or November.

“Brazil, on the other hand, has now lost all export bargaining power, being back to one major customer: China. And not coincidentally, the price of meat to China is now dropping.”

Other Australian exporters have somewhat different views, suggesting the US importer is still footing the full 10pc tariff bill for Australian imports. He said different product types were treated differently by the trade, with insides (cap off) being the last product to move beyond the 10pc tariff value, and to start to trade above it. Loin cuts, on the other hand, saw the tariff absorbed by the importer almost immediately.

Brazilian beef held in cold storage

A Queensland beef exporter contact pointed to large stockpiles of frozen Brazilian beef that have built up in US cold storage, in advance of the tariff rise.

“There’s a lot of product in inventory in the US, mindful that the tariff on Brazil was on the way,” he said. “That can last 12 months frozen, if required.”

“Secondly, Brazil has until early October to deliver and clear product already on the water, where the tariff will not apply.”

“Also, we are now in a period where US beef consumption declines during August, with the summer grilling season over. We would not expect trade to pick up again until September, but having said that, US importers are clearing trying to ‘pick their trades’ at present, and do not want to push the market too hard by panicking and rushing in to buy Aussie or NZ beef, while the Brazilian product is out of the picture. There’s an element of that evident.”

The Queensland processor acknowledged that while trimmings prices into the US this week had shown a ‘very slight rise,’ it certainly did not yet reflect the Brazil tariff changes.

Asked why there was still such a large gap between frozen imported 90s and fresh domestic US 90s, he said it was because a lot of the domestic US product was sold fresh, in the retail market segment. Little imported product tended to be sold in the retail segment, with most of it being used in food service via hamburger chains and myriad other outlets.

“There’s obviously a premium for the fresh local product to go through a Walmart or Krogers supermarket, and that reflects in the price discrepancy,” he said.

The spread between fresh and frozen then came down to the immediate supply and demand situation. Prices today on imported 90CL, starting at US320c/lb, plus 32c/lb tariff, plus 8c/lb clearance, for a landed price of US360c/lb. Domestic fresh US 90s were trading on Monday at US420c/lb, for a premium of 60c/lb or 14pc.

“But that premium was as much as US80c/lb last year. So it has narrowed a little, and will only likely to decline further as the Brazil beef held in inventory starts to disappear.

“On top of that, we expect the US beef kill to fall below 500,000 a week soon, leaving an even larger hole to fill.”

Australian cow prices softening

Despite the mixed signals coming out of the US market, July Australian beef exports into US East and West coast ports topped 43,000t, up another 22pc on the previous month as US production continues to dwindle.

That’s fuelled some extraordinary saleyards prices for cows out of Queensland and NSW since late July, with the peak last week seeing cows selling for 440c/kg on-leg in the yards. That valued those heavy cows at an unbelievable 845-870c/kg dressed weight, with freight of up to $150 to get them home to Victorian and southern NSW processors on top.

There’s clear signs this week that some southern processors currently reliant on northern cows may have been losing $300 a head, and one source suggested as much as $500 a head – despite the prices for trimmings and manufacturing beef in international markets.

“I’ve never seen such negative margins on cows in history,” one NSW processor said this morning.

That’s promoted some processors to wind-back kills, with one southern NSW operator now operating only three days a week. So the best of the cow price cycle may now be over.