February 5, 2007

 

Australian beef exports to fall in 2007
 

 

The drought and competition from US beef in north Asian markets are the two key and unpredictable factors that will shape Australia's cattle and beef industries over the next few years, according to Meat & Livestock Australia.

 

MLA's chief market analyst Peter Weeks said that both Australia's cattle herd and beef production could fall in 2007, which would offset some weakening in export demand and leave cattle prices similar to the near-record averages seen in 2006.

 

However, the short term outlook for the cattle and beef industry would be dominated by the aftermath of the severe drought which will likely see a fall in output, provided sufficient rains are received by autumn.

 

Assuming average summer rains in northern Australia and a break from the drought in southern areas in autumn, beef production is forecast to fall around 4 percent in 2007, to 2.1 million tonnes and remain below the 2006 peak until 2009, according to MLA estimates.

 

The fall in Australian beef production following the drought, some easing in export demand and prices, and continuing strong domestic demand are likely to see Australian beef exports a little lower over the next two to three years.

 

Beef exports could fall by 4.6 percent this year to 910,000 tonnes shipped weight. While exports are expected to begin expanding again from 2008, the 2006 peak is unlikely to be exceeded before 2010.

 

With production growth and a renewed rise in north Asian demand, exports could reach 1.05 million tonnes by 2011, 10 percent higher than in 2006.

 

While Japan, South Korea and the US would continue to be major markets, competition from South America and India in other markets is expected to remain fierce, it said.

 

Grainfed beef output is likely to decline modestly in 2007 due to higher grain prices and lower shortfed beef prices to Japan and South Korea as competition from the US strengthens.

 

Demand for Australian beef might weaken from recent high levels with the return of US beef, albeit partially, to Japan and South Korea and as US beef prices come off their cyclical peak, said the report. However, the fall is unlikely to be precipitous, as Australia is expected to largely retain gains made in Japan and South Korea, the cyclical rise in US production has been delayed and seems likely to be slow and consumer demand on the Australian market remains strong.

 

Exports of live cattle are forecast to rise by 4 percent this year to 655,000, due to strong demand, particularly from Indonesia, and an anticipated buildup in cattle supplies in northern Australia as a result of recent good seasons.