China's huge frozen beef stockpile halts Australian imports amid new tariff

Australian beef exports to China have effectively stopped following the implementation of a new 55% tariff one month ago. This has resulted in substantial stockpiles of beef within China, according to Murray Davis, Meat and Livestock Australia's (MLA) regional manager for Greater China. He noted that beef prices in China have seen only a minor increase due to these "huge quantities" of existing inventory.

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There's something like 500,000 tonnes of Brazilian beef already in storage and Australia has sold 200,000 tonnes of beef so far this year [to China], so that can't possibly have all been consumed.

China currently holds an estimated 500,000 tonnes of Brazilian beef and has already sold 200,000 tonnes of Australian beef this year, much of which is believed to be entering the country's strategic reserves. China has been actively developing significant government storage facilities for grains, oils, and animal proteins to bolster its supply chain resilience. Davis anticipates that frozen beef from Australia and Brazil will be gradually released throughout the remainder of the year to ensure a consistent supply.

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Unknown quantities will be going into what's called China's strategic reserves.

This situation has created a challenging period for Australian exporters, who are now looking for alternative markets for approximately 100,000 tonnes of beef. The United States, Japan, South Korea, and the Philippines are expected to absorb the majority of this volume. Additionally, Australian beef faces another looming tariff in South Korea, with the 196,000-tonne export quota expected to be reached within weeks, triggering a 24% tariff. Brazil is also nearing its 1.1 million-tonne export quota to China, after which a 67% tariff will apply.

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Our initial assessment is that the United States, Japan, Korea and the Philippines will absorb most of that volume.

Simon Quilty from Global Agritrends stated that China's imported frozen beef inventory is comparable to levels seen during the COVID-19 pandemic, attributing this to stockpiling efforts by both Brazil and Australia. He noted that unlike during the pandemic, current market conditions are not impacted by lockdowns, and consumption remains robust. Quilty expects shipments from Brazil and Australia to resume in September for next year's inventory, with feeder steers also being secured at a premium. Davis added that some traders, caught by the 55% tariff, are storing product in bonded warehouses in China to clear customs in January with the hope of avoiding tariffs, while others are storing inventory within Australia.

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Beef exports to China have plummeted after the 55 per cent tariff was triggered.