Australian Beef Gains Ground in Japan as Trade Deal Buoys Sales

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Australia is set to strengthen its dominance over the U.S. as Japan’s biggest beef supplier as a trade deal drives shipments toward a four-year high.

Imports of Australian chilled beef rose 8 percent last quarter and may reach the highest since 2011 while shipments from the U.S. drop to the lowest in three years, according to Tatsuo Iwama, executive director of Japan Meat Traders Association. The rising inflow of Australian meat to Japan’s $2.6 billion beef market is the result of decreasing tariffs triggered by a bilateral agreement that went into effect in January, he said.

Australia’s expanding market share will spur the U.S. to reach a similar deal with Japan, its biggest beef and pork buyer, according to Makiko Tsugata, an analyst at Market Risk Advisory Co. in Tokyo. The two countries have been in talks for months to strike a bilateral agreement, which would pave the way for the 12-country Trans-Pacific Partnership. U.S. President Barack Obama is seeking fast-track trade negotiating authority from Congress. Senate Democrats staged a last-minute rebellion on Tuesday by blocking a test vote on the trade measure.

“Lower duties for Australian products are attractive to Japanese meat importers and beneficial to local consumers,” Iwama said in a May 11 interview in Tokyo. “The U.S. beef industry needs an early conclusion of TPP talks to regain equal footing with Australian exporters.”

The Japan-Australia Economic Partnership Agreement is giving Australia an edge over the U.S., the Australian Bureau of Agricultural & Resource Economics & Sciences said in March.

Competitive Advantage

“Australia’s market share is expected to increase as Australian beef gains a competitive advantage over U.S. beef because of lower tariffs,” Abares said in the report.

Prime Minister Shinzo Abe and Premier Tony Abbott signed the accord in July, under which Japan agreed to gradually lower tariffs on Australian chilled beef to 23.5 percent over 15 years from 38.5 percent. They’re currently at 31.5 percent after two rounds of cuts. Duties on frozen beef will be halved to 19.5 percent over 18 years.

Chilled-beef imports from Australia climbed to 27,723 metric tons in the three months to March 31, while those from the U.S. fell 27 percent to 12,913 tons, according to Japanese ministry data. Shipments from Australia this fiscal year will be the highest since reaching 132,549 tons in the year ended March 2012, Iwama said.

U.S. exports slid as a port strike on the U.S. West Coast delayed shipments, said Susumu Harada, senior director at the U.S. Meat Export Federation’s Tokyo office. Harada declined to comment on the TPP or its potential impact, citing internal policy.

Top Supplier

Australia overtook the U.S. in 2002 as the top supplier to Japan’s beef market, estimated at 307 billion yen ($2.6 billion) last year, and solidified its gains after a government ban following the discovery of mad-cow disease in U.S. cattle in 2003. The nation shipped 281,706 tons to Japan in 2014, accounting for 54 percent of the overseas supplies, while the U.S. made up 36 percent, Japanese government data show. Japan relaxed trade restrictions on U.S. beef in 2013.

Japan’s total beef imports in 2015 will fall 2 percent to 727,000 tons because of higher price offers from the U.S. and Australia as cattle slaughter and production falls in both countries, the U.S. Department of Agriculture’s Foreign Agricultural Service forecast last month.

Australia’s Eastern Young Cattle Indicator has risen more than 20 percent this year to A$4.760 a kilogram ($1.72 a pound) as of May 12, the highest in data dating back to 1996. Cattle futures on the Chicago Mercantile Exchange have gained about 5 percent to $1.51475 a pound since touching a nine-month low in March.