March 25, 2011

Decrease in Australian cattle hinders beef trade

Beef exports from Australia will reach an eight-year low due to a shortage of Australia cattle for sale, which has caused prices to hit a record high.

The situation is expected to persist for the rest of the year. Supplies of cattle for sale have fallen considerably in Australia due to improved conditions for rearing animals brought by rains which, in some parts, have proven the strongest in 123 years.

Besides watering pasture land, the rainfall downgraded large quantities of Australia's grain crop from food quality, meaning ample quantities of fodder.

"Producers have begun to withhold cattle suitable for breeding purposes," according to USDA officials in Canberra.

This had led to a genuine shortage of cattle for slaughter, causing some processing plants to wind back slaughter to match lower cattle supplies.

The squeeze on cattle supplies has already driven prices, as measured by the eastern young cattle indicator, to within an ace of the record AUD4.1675/kg (US$4.2515/kg) reached six years ago, after an outbreak of mad cow disease, which locked the US out of the important Japanese beef market.

The price reached AUD4.13 (US$4.21) in January, before easing to AUD4 (US$4.08) this month.

The USDA attaches also said that the tight market conditions would persist for the remainder of 2011, and they would be reflected in a continuing trend of declining slaughter rates, which have already fallen from 8.7 million in August 2009, on a trailing annual basis, to eight million in December last year.

In trade terms, constrained beef production would foster a drop of 18,000 tonnes to 1.35 million tonnes in exports, the lowest figure since 2003.

The attaches also forecast a decline in live cattle exported, which they expected to fall to a four-year low of 850,000 head, a figure some 30,000 animals below industry estimates.