March 12, 2004

Australian Beef Production Constrained Despite BSE Demand

Australia isn't likely to fill an annual quota on beef exports to the U.S. in 2004, but the longer term outlook for the trade is bright, Agriculture Minister Warren Truss said Friday.
 
Australia, a major global exporter, faces "a number of challenges" to meet its 2004 U.S. import quota of 378,214 metric tons, he said.
 
Factors cited by Truss that could limit exports to the U.S. this year include a downturn in demand for Australian beef in the U.S. after the discovery there late in 2003 of a case of bovine spongiform encephalopathy, or mad cow disease, and stronger demand in Japan, another major export destination.
 
Beef production in Australia could also be constrained in many areas this year as producers rebuild herds and restock properties after reducing herds during a savage drought in 2002 and 2003, he said.
 
Truss was commenting after announcing that Australian exporters filled the U.S. quota in 2003, demonstrating that the Australian government's equitable quota allocation system for exporters has again worked successfully.
 
This system was introduced after Australia exceeded its full quota access to the U.S. in 2001 by 35,110 tons, he said.
 
For the past three years, Australia has shipped an average 390,000 tons a year to the U.S. at an average value of A$1.55 billion/year, he said.
 
The 2003 quota was filled despite the Australian dollar strengthening by 34% against the U.S. dollar in 2003, he said.
 
"The U.S. market is very important for our beef industry, providing important diversity and an outlet for manufacturing beef not available elsewhere in world markets," he said.
 
Australian beef exports to the U.S. mostly comprise lean manufacturing product which is ground and blended with fattier U.S. beef to make hamburger
 
Truss also said a broad trade agreement between Australia and the U.S. announced Feb. 8 is "a bright light on the horizon for beef producers."
 
Under the agreement, which both countries hope to implement from Jan. 1, 2005, the immediate abolition of an in-quota tariff of 4.4 U.S. cents/kilogram on Australian beef imports will benefit Australian producers by A$22 million a year.
 
Further gains come from an increase in the annual quota by 15,000 tons in year two or three potentially worth around A$60 million/year, he said, rising to a 70,000-ton quota increase in year 18 from now.
 
As well, an out of quota tariff of 26.4% will be phased out beginning in year nine, he said.
 
"While there is a question over whether beef production in the short term will be sufficient to enable us to fill the beef quota, the Australian government has put in place the framework, through the (trade agreement), for industry to maximize opportunities in this very valuable market," Truss said.