Independent livestock analyst Simon Quilty of Global Agri Trends shares his thoughts on how US tariffs could affect the Australian beef and sheepmeat sectors.
All meat and livestock imports into America will face tariffs as of midnight on 2 April.
In brief, tariffs will be applied as follows:
- A 10 per cent (pc) rate will be assessed on imports from the following: Canada, Mexico, Australia, Brazil, Argentina, New Zealand, Chile, Guatemala, Costa Rica, and others
- Beef from Nicaragua will face an 18 pc tariff, and pork from Europe will be subject to a 20 pc tariff
- Beef from Brazil will face a 10 pc tariff, on top of the ‘other’ tariff of 26.4 pc, taking them to 36.4 pc. Japanese beef now has a 24 pc rate on top of the ‘other’ 26.4 pc, making Japanese Wagyu rates now 50.4 pc, a punitive level.
Retaliation is yet to be announced by any country (except China and Europe last week). No exceptions were announced.
US negotiations will continue, which could lead to some exemptions and/or lower rates in the coming weeks and months.
This is quite palatable for global meat and poultry exporters, considering that rates could have been much higher. The US dollar has strengthened against many of these key currencies over the past six months, absorbing as much as half of that tariff rate.
We expect a collective ‘sigh of relief’ from agriculture markets. Our advice at Global Agri Trends is to ‘panic slowly’.
Market Impact
Beef:
- These tariffs will be supportive of the record-high US beef prices. Brazil and Japan continue to face their disadvantage due to their lack of free trade agreements, which relegates them to the ‘others’ quota, which charges 26.4 pc once filled. It was filled in the first three weeks of 2024.
- Canada and Mexico's flows of beef and cattle to the United States will see little adjustment.
- Beef imports accounted for 15 pc of U.S. consumption last year. In the last 24 hours, the US imported 90s jumped 5 USc/lb, which is a significant daily gain in today's market, driven by clarity and pent-up demand, as much trading in recent weeks had come to a standstill.
- Given Australian exports that are essential items for the US make up almost half of Australia’s exports (lean beef and thin meats), any negative impact will be minimal. I expect cattle prices to remain at higher levels as soon as the market quickly absorbs the 10 pc tariffs and moves forward. The lack of cattle supply in Australia is expected to have a far greater impact and positive impact on pricing, particularly in an upward direction, compared to US tariffs as the market moves forward.
Sheep and lamb:
- This will impact the heavy lamb market, which is 18 pc of Australia’s lamb industry, of which the following go to America: racks (47 pc), short loins (70 pc), and legs (44 pc). These cuts comprise 41,765 metric tons of the total 96,381 metric tons. These will struggle to find alternative options and are likely to continue flowing based on strong North American prices.
- Any downward impact on lamb pricing is likely to be short-lived as tight Australian supplies on lamb are likely to see strong prices going forward.
Conclusion
Any tariffs are disappointing, but I truly believe 10 pc is manageable for both Australia's sheep and cattle sectors. Global fundamentals have not changed; beef and lamb supplies are likely to become tighter over the next two years, and consumer spending on proteins remains strong.
Long may this continue. There is life after tariffs.
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