January 31, 2005

Australian cattle hit record prices in 2004

Average saleyard cattle prices rose to record levels in 2004, driven by the unprecedented overseas demand for Australian beef, combined with strong domestic demand, tight cattle supplies and heightened restocker interest in southern areas following improved seasonal conditions.

Demand for Australian beef in Japan and Korea, the first and third largest beef export markets in 2004, reached record levels following the BSE-induced ban on US beef shipments to these countries in late 2003. As a result, Japanese steers reached a record calendar year average of 178¢/kg lwt ¨C 4% above the previous year's level.

Demand in the US, Australia's second largest export market, was also remarkably strong in 2004, despite the rise in the A$ against the US$. This heightened demand was supported by the popularity of high protein/low carbohydrate diets, an improving economy and a decline in domestic cattle supplies. The strong US demand for Australian beef contributed to the saleyard price for cows suitable for the US beef market averaging 135¢/kg lwt for 2004 ¨C 13% higher than in 2003 and only 1% below the record of 137¢/kg lwt, set in 2001.

Despite the intense competition from export markets and the associated rise in retail beef prices, Australian consumer demand for beef grew further in 2004. Contributing to the rise in consumer demand was generally strong consumer spending, a lift in the quality of beef, improved presentation and marketing and more positive nutritional and dietary attitudes towards red meat.

In response to the strong domestic demand for beef, the average price for trade steers rose 8% on the previous year to a record of 189¢/kg lwt for 2004. The benchmark Eastern Young Cattle Indicator (EYCI) also rose 12% in 2004, to a record average of 350¢/kg cwt, driven principally by competition from feeders and processors.