An industry report concludes Japan and South Korea will continue to be important markets for beef exports over the coming five years, with steady demand expected in both countries, according to a new industry report.
The report, Uncovering the Value of the Japanese and South Korean Beef Markets, by agribusiness banking specialist Rabobank, says Japan and South Korea already represent two very important markets for Australia’s beef industry, “despite not boasting the headlines of record growth or market-setting prices” seen for other export destinations, such as China and the United States, in recent years.
Rather, Japan and South Korea’s underlying value comes from their consistent and stable consumption patterns, ease of doing business and ability to optimise carcase value, it says.
Japan and South Korea represented a combined $3.7 billion worth of beef exports for Australia in 2020 (38% of Australia’s total beef exports by value).
Rabobank expects total import volumes for Japan to grow over the next five years at an average of just over 2% a year, while South Korean total beef imports are forecast to grow slightly faster at just under 4% per annum.
Report co-author, Rabobank senior animal proteins analyst Angus Gidley-Baird said while neither Japan nor South Korea represented the import volume growth prospects of China and some other countries, they were nonetheless very important markets for Australian beef into the future.
“Given that Australia’s current beef production is down and is many years off recovering and growing beyond its previous volumes, what we need at the moment is strong trade partners who value the Australian product,” he said.
“Over the past 20 years, the Japanese and South Korean markets have remained true to form, providing major beef-exporting countries, such as Australia, with a stable, reliable market. At the same time, the strength of demand in these markets also means they hold their own on volumes and prices.”
Having access to the Japanese and South Korean markets “provides a foundation for Australia’s beef exports”, the Rabobank report says.
“These countries will continue to form the cornerstone of the Australian beef export market and, as such, help to underwrite the success of the Australian beef industry,” Mr Gidley-Baird said.
“This makes them critically-important trading partners that require ongoing attention.”
Recognising and working to improve the underlying values these markets provide will ensure Australia retains its position as a preferred supplier to Japan and Korea, the report says.
“As Japan and South Korea are established and stable markets, availability of product and pricing are critical factors in maintaining supply relationships,” Mr Gidley-Baird said.
“Focusing on the value propositions of consistency and stability, ease of doing business and adding value to the carcase also provides the means to continue to extract value from these markets and to further embed Australia as a preferred supplier.”
Working to develop a more consistent and stable supply chain for the Japanese and South Korean markets – both in terms of production volumes and quality – could create a better outcome for both countries, the report says.
Mr Gidley-Baird said grain feeding cattle was one way to improve consistency and quality. “We already see a strong preference for grain-fed beef into Japan and South Korea with 51 per cent and 37 per cent of exports respectively made up of grain-fed beef,” he said.
“But there are also ways to improve consistency and quality in a pasture-based system, including managing stocking levels and feed availability with a view to turning off cattle that meet market specifications and reducing the impact of seasonal variation.”
While geopolitical influences impact other beef export markets, well-established trade agreements and historical business relationships will help maintain access for Australian beef into the Japanese and South Korean markets, the report says.
“The existence of trading houses established markets and trade agreements facilitate a strong business-to-business connection and support ongoing relations,” Mr Gidley-Baird said.
The prominence and scale of these large trading houses – which manage the bulk of beef imports in both countries – provide a degree of stability in these markets, he said, and these relationships could be further leveraged.
“Forging deeper relationships with the large trading houses could lead to opportunities, leveraging their market presence and knowledge to identify changing consumer preferences and develop new products for market and to reduce costs for Australian operators,” he said.
Adding value to carcase
While Japan and South Korea – which have a preference for sliced and ground beef or beef in small pieces – currently provide strong markets for beef cuts that hold lower value in the Australian domestic market, there is scope to extract additional value from the whole carcase there, the report says.
“Product development, consumer evolution and the availability of supply offer scope for ongoing improvement in this area,” Mr Gidley-Baird said. “Both Japan and South Korea are relatively conservative in their cut use, with entrenched processes that drive demand, but in itself this presents opportunity to work with the supply chain partners – including the large trading houses – to develop and deliver products that best meet each party’s needs.”
While Australia and the United States currently “hold the box seat” as dominant suppliers of beef to Japan and South Korea, the report warns there is “no room for complacency” when it comes to these markets.
“There are now other global players with their eyes on these valuable markets,” Mr Gidley-Baird said. “Poland, Ireland, the UK, Mexico and Canada have all increased volumes of beef to Japan recently, though volumes in South Korea are more stable.
“While these other exporters remain a small proportion of the market, Canada, Mexico, Poland and Ireland all have possibilities of increasing scale. And increasing formalisation of trade alliances and trade relationships will continue to erode Australia’s current trade agreement advantage.”