Global AgriTrends analysts Simon Quilty

AUSTRALIAN lamb and beef producers might benefit from moves by American president Donald Trump to levy tariffs in some of Australia’s major red meat markets.

The Trump administration has said it would reciprocate with tariffs on countries with consumption, ‘value-added’ taxes or goods and service taxes, but Global AgriTrends analyst Simon Quilty said Australia’s GST was not applied to food, including red meat.

“But if you look at all our competing countries, they have VATs that are sizeable and therefore this could place us at another strategic advantage for beef and lamb as well.”

Mr Quilty said tariffs on beef imports would be inflationary to US domestic pricing and could benefit Australian exporters.

He said if tariffs created higher offering prices out of America into Japan, Korea and China, this would benefit Australia.

“So I see a positive on that front.”

However, Mr Quilty said Australia could not ignore any calls to Mr Trump by cattle/sheep producer lobby group R-Calf USA and the American Sheep Industry Association for tariffs on beef and lamb imports.

“I think we’ve really got to get the message out there that Australia is tightening its supply dramatically and that this will support US lamb prices not work against them.

“I think the message is that very tight supplies are expected in the back half of this year and next year, which will be price supportive,” he said.

“This will create stronger lamb for domestic lamb and imported lamb in the United States.”

Mr Quilty believes Australia’s free trade agreement with America would stand Australia in good stead by providing structure.

“I think the framework and structure remains in place, it just means that in the meantime there will be nuances.”

Concern about wool’s future

Mr Quilty spoke at the Gippsland Red Meat Conference in Bairnsdale yesterday and said he detected genuine concern about the wool industry at the Gippsland conference.

“Even though it was a meat conference, there was a deep deep concern among wool producers that attended.

“The wool prices, the lack of demand and cash flow is a huge issue, for sheep and beef producers,” he said.

“There was a genuine belief that producers were exiting out of wool and sheep, it is happening here as it is everywhere else.”

Quilty is bullish on lamb prices

Mr Quilty said the mutton kill is still elevated and the lamb kill is still high

“It points to female lambs being a big part of that mix and therefore producers are killing the future and exiting.”

Mr Quilty said the current prices for lamb and mutton don’t seem to be enough for many producers to maintain their flocks.

“I’m very bullish on prices.”

Mr Quilty said global markets for red meat are improving – in the United States, Middle East and Asia – all the key markets.

He is forecasting lamb prices to peak in August with a traditional tightening in supply over winter with the tightening in lamb supply potentially starting a little earlier than in other years.

“But maybe between now and then we are going to have a bit of a flush as we clean out and the uncertainty over weather continues.”

Mr Quilty said certain parts of the Riverina have had good rains, but western Victoria and south-east South Australia is still a worry seasonally.

“But east Gippsland is wet; it looks fantastic, west Gippsland not so good.

“Hopefully these are all indicators that we are in for a good autumn break and the rebuild of the sheep flock and the cattle herd can start in earnest.”

Mr Quilty said he believed the herd rebuild will start after autumn this year.

“We’ve had two years of pretty solid liquidation across the eastern seaboard and I think the price spread on heifers and feeders, along with the female kill ratio, are enormous telltale signs that liquidation has been occurring.

“I think we are towards the end of that period of liquidation and we’re starting to look at a rebuild.”

Airfreight boost will be welcome

Commenting on the proposed alliance between Virgin Australia and Qatar Airways with 28 new weekly return services between Doha and Perth, Brisbane, Sydney and Melbourne, Mr Quilty said Australia would benefit from any increase in airfreight capacity into the Middle East and then into Europe.

He said the Middle East had become Australia’s largest regional sheep meat market driven by airfreight carcasses and bone-in product.

He said the sheer volume of product that is airfreighted out of Australia is impressive.

“Full credit to companies like Midfield that have grown that market and have truly given is the most important outlet for light lambs in Australia that we’ve seen in years.”