February 22, 2010

Australia beef sector faces another challenging year

Australian cattle producers and beef exporters can expect another year of subdued prices and lacklustre export demand, but the low-point in prices should have passed.

Cattle prices are expected to post only modest improvements in 2010, led by cows and young cattle. Prices for heavy export cattle categories are likely to be the most constrained due to low import demand, the high Australian dollar and increased competition faced from US beef in South Korea and Japan.

On the back of the recent rainfall, and a smaller cattle herd due to previous poor branding years, cattle slaughter is forecast to tighten 4.5% in 2010 to 7.4 million head - the lowest since 1996 - and beef production by 4%, to 2.05 million tonnes cwt.

With tighter supplies, a continued high Australian dollar and intense competition from the US, Australian beef exports are expected to fall 5.7% in 2010 to 875,000 tonnes swt. These factors, plus tough economic conditions and higher South Korean beef production, is expected to see Australian beef exports to Korea fall 18% to 95,000 tonnes swt, and to Japan by 7% to 330,000 tonnes.

Despite an expected supply-induced recovery in US beef and cattle prices, the high Australian dollar and lower Australian supplies are expected to limit the recovery in shipments to the US market to only 3% or 260,000 tonnes swt.

Indonesia is expected to continue expanding both beef and live cattle imports this year, while exports to smaller markets, including the Middle East, the EU and CIS are also expected to hold firm or expand.

After an increase in total consumption in 2009, the domestic market will remain an attractive outlet for Australia beef, with consumption increasing slightly to 740,000 tonnes swt in 2010.