Russia is currently Australia’s fourth-largest export market, taking an average of 44,459 tonnes swt of Australian beef annually over the past five years. However, shipments slowed to 31,054 tonnes swt in 2012 and were back 52% year-on-year in the first quarter of 2013.
This is despite data from the latest World Economic Outlook (WEO) revealing that the Russian economy performed well during the global financial crisis, growing at an average rate of 4.1% since 2010.
MLA analysts said the slowdown in exports to Russia last year was largely due to competition from cheaper South American imports, particularly Brazil. A large devaulation in the Brazilian currency increased the competitiveness of Brazilian beef last year and Brazil’s steer prices averaged US¢329/kg cwt in 2012, while Australian steer prices averaged US¢357/kg cwt.
Australian exports also faced competition from Paraguay, which has diverted beef to Russia in the face of market access restrictions in Chile, and where steer prices average just US¢282/kg cw.
The price differential between Australian and South American beef has reduced in 2013, but the rise of Australian beef exports to China and Saudi Arabia in early 2013 has drawn beef away from Russia, the MLA said. Analysts explained that this is because Brazilian beef is banned in China and Saudi Arabia, meaning that prices in these markets are higher and more attractive for Australian beef exporters.
“As Australia has limited competition from Brazil in these markets, prices received can be higher than in markets where Brazil is a large competitor. Brazil, on the other hand, lacking access to these burgeoning markets, must sell their beef at lower prices into markets which they have access and compete with Australian product, Russia being a perfect example,” they said.
However, the analysts also pointed out that the slowdown in beef exports to Russia has primarily impacted on frozen shipments, with chilled exports to Russia reaching 504 tonnes swt in the first quarter of 2013, a record level and a twofold increase on 2012 exports. “The strong growth in chilled shipments is partly the result of a ban on US beef and strong economic growth driving demand for high-quality beef,” explained the MLA anaysts.