March 8, 2010

Australia cattle herd to slowly rebuild

The Australian cattle herd is forecast to slowly rebuild towards 28 million head over the next five years, underpinned by favourable conditions in northern Australia and improved incomes for producers.

However, over the coming year, the high Australian dollar and increased competition from US beef in Japan and South Korea are expected to continue to pressure saleyard cattle prices, which are forecast to average 6% lower in 2009-10 and 3% lower in 2010-11, according to Abare. The agency said cattle prices will start to improve from 2011-12 onwards, rising steadily through to 2014-15.

Stronger competition from US beef in Japan, along with sluggish beef demand and a high Australian dollar will result in exports to Japan shrinking 6% in 2009-10 to 341,000 tonnes swt. A 4% decline in beef production for the year will also constrain the amount of beef available for export. The main impact on Australian beef of the return of US beef in South Korea will be in the 2010-11 fiscal year, with Australian shipments forecast to decline 6% to 110,000 tonnes swt, said Abare.

For the US, Australian shipments in 2009-10 are forecast to fall to 240,000 tonnes swt, before increasing 8% in the following year, to 260,000 tonne swt. According to Abare, Australian shipments to the US are expected to steadily increase through to 2014-15 to 295,000 tonnes swt, as the US cattle herd enters a rebuilding phase, constraining beef production and raising demand for imported product.

For the Australian live cattle export industry, Abare has forecast a further expansion in exports through to 2014-15, reaching 1.04 million head. The steady rise in shipments will be primarily underpinned by strong demand from Indonesia, along with further herd growth across northern Australia.