Comment: Changing beef outlook

Allan BarberThere have been some interesting beef market developments in recent days, notes Allan Barber.

Of immediate interest, is the news of a forecast excess of US exports over production in the second half of the year as against a relatively small increase in production, reported in the USDA livestock supply and demand report which was released yesterday.

This leads to a prediction of firmer prices for lean beef, although this will coincide with the seasonal downturn in New Zealand production. Australia is expected to be in a good position to take advantage of this situation.

The other item of interest is the bi-lateral trade agreement between Japan and Australia – Japan-Australia Economic Partnership Agreement – which will reduce the tariff on frozen beef from 38.5 percent to 19.5 percent over 18 years and on fresh beef to 23.5 percent over 15 years.

While this may appear to be unduly slow, all other countries’ beef tariffs will remain at the 38.5 percent rate, until or unless the Trans-Pacific Partnership (TPP) agreement is concluded. It would be difficult for Japan to expect to negotiate a less favourable deal with signatories to the TPP and, if more favourable, the terms of the Australian free trade agreement (FTA) would be amended to match it.

In the meantime, New Zealand’s beef exports to Japan will have to compete with Australian product at gradually decreasing tariff rates.

What is significant here is that the FTA has taken seven years to negotiate, but indicates an increasing willingness to open up the fiercely protective Japanese agricultural sector under pressure from Prime Minister Shinzo Abe. Cheese has also benefited under the terms of the FTA with Australia permitted to export a further 20,000 tonnes.

Japan has a highly protected and subsidised farm sector, particularly in the areas of rice, beef, pork, dairy, and sugar and its powerful farm lobby has long resisted any efforts to liberalise trade in those products. It will be fascinating to see how successful Abe is in encouraging more concessions in pursuit of the TPP.

Equally, he could find himself going down the path taken by all Prime Ministers of recent years which has seen Japanese trade policy stagnate in the face of opposition and an inability to get reform measures through the Japanese parliament.

Allan Barber is a meat industry commentator. He has his own blog Barber’s Meaty Issues and can be contacted by emailing him at allan@barberstrategic.co.nz.

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