January 5, 2004

 

 

Australian Ranchers Anticipate Increased Beef Sales to Asia in the Wake Of US Beef Ban

 

Australian ranchers are anticipating more beef sales to Japan and South Korea as a result of a ban on U.S. beef. Rancher Scott de Bruin aims to increase production by 20%

 

The two Asian nations are among more than 30 countries that barred U.S. beef after one case of mad cow disease was found in a Washington-state herd. Japan and Korea buy about two-thirds of U.S. beef exports, which amounted to as much as $3.8 billion in 2003.

 

A shortage of the fatty U.S. meat many Japanese prefer means higher prices for ranchers like De Bruin, who this year aims to sell 300 Wagyu cattle -- the breed producing Japan's Kobe beef. For Australia, the world's biggest beef exporter, U.S. misfortune may reverse a two-year slide in sales as the weakening U.S. dollar made Australian exports more expensive.

 

"There would be more demand for our type of product in Japan and South Korea,'' said De Bruin, who just covered his costs last year on his 1,800-hectare (4,450-acre) ranch in South Australia. "The risk is that there's a widespread backlash against beef'' because of consumer concern over mad cow, he said.

 

Yoshinoya D&C Co., Japan's third-biggest restaurant chain, and Aeon Co., the country's second-biggest retailer, have said they will seek more Australian beef to fill any shortage.

 

Japan, which relies on the U.S. for about 30% of its beef, will send government officials to visit Australian meat packers on Wednesday to ensure supplies and discuss the possibility of raising imports, said Yuichiro Watanabe, deputy director of the meat and egg division at the Ministry of Agriculture.

 

Japanese and Korean demand may help revive exports from Australia. Sales fell in 2003 after the nation recorded its biggest annual slump in cattle numbers in 24 years because of drought. The national herd dropped 6.7% to an eight-year low of 26 million in the year to June 30, Meat & Livestock Australia said.

 

As at Dec. 18, Australia exported 832,228 metric tons of beef in 2003, or 9.6% less than the 920,365 tons sold the previous year, Australian government statistics show. Exports in 2003 will probably be the lowest since at least 1998, when they totaled 856,000 tons.

 

"My guess is that you'll see strong export demand for the next six months, maybe even longer,'' said Paul Troja, managing director of Rockdale Beef, an Australian cattle-fattening farm owned by Japan's Itoham Foods Inc. and Mitsubishi Corp. "A lot of cattle that would normally be sold for the domestic market will be diverted to export markets.''

 

Some ranchers say the lack of cattle, exacerbated by ranchers holding back animals to rebuild their herds, will hamper Australia's ability to supply additional meat to Japan, South Korea, Taiwan and other markets in Asia.

 

"It's going to a real problem,'' said Lex Crosby, general manager of livestock in Australia with Osaka-based Hannan Corp., Japan's biggest buyer of Australian chilled beef.

 

Sydney-based Australian Agricultural Co., the world's second- biggest rancher, said today it paid A$50 million for land and cattle to increase its breeding herd by 19% and take advantage of any pickup in the beef cattle market.

 

"Breeding cows are very hard to get hold of,'' Chief Executive Peter Holmes a Court said in an interview. He aims to raise 17% more calves following the purchase of the 50,613- hectare (125,000 acres) Carrum Station and 58,000 Brahman breed and Brahman-cross cattle.

 

Shares of Australian Agricultural, which owns 460,000 head, have gained 14% since the mad-cow case in the U.S. was reported on Dec. 23.

 

Japan imported 100.2 billion yen ($937 million) of Australian beef in the first 11 months of 2003, Sydney-based Meat & Livestock said, citing Japanese Finance Ministry figures. That accounted for 45% of the value of Japan's beef purchases. The U.S. grabbed a 52% share.

 

Australia's share of the imported beef market in Japan "will grow because America won't be there but it will be a smaller market,'' said David Clark, marketing manager of Stockyard, a Brisbane-based meatpacker and rancher that processes about 78,000 head a year, mostly for Japan and South Korea.

 

Australian Dollar

 

In addition to some consumers deserting beef because of health worries, the rise in the Australian dollar over the past 12 months has made the country's exports more expensive compared with U.S. products. The Australian dollar was the best performing currency against the U.S. dollar in 2003, strengthening by 34%.

 

"Australian meat was already getting forced off the shelves because of its higher price and the cheaper availability of chicken and pork,'' Clark said.

 

Still, reduced competition from the U.S. will be beneficial for De Bruin and other Australian ranchers targeting the grain- fed beef market. His full-blood Wagyus fetch about A$4,000 ($3,020) a head after spending 500 days in a feedlot.

 

Of the beef Australia sells to Japan, 40% is from grain-fed cattle. The other 60% is from cattle fattened on grass, which tend to be leaner and command a lower price.

 

"If America is taken out of the market, that's a huge loss'' of supply to the Japanese market, said David Blackmore, who is fattening about 700 Wagyus in Victoria state.