April 5, 2012

Australian cattle prices to plunge further in 2012

The Eastern Young Cattle Indicator (EYCI) is expected to decline during 2012, albeit by less than the 5.6% forecast earlier in the year, according to the latest National Australia Bank (NAB) Rural Commodities Wrap.

Underpinning the expected decline in average cattle prices is the predicted rise in Australian beef production, which is forecast to increase 0.6% in 2011-12 and a further 2.1% in 2012-13. The report also highlights the strength of the AUD as a challenge to prices.

However, helping to maintain prices is the expectation that global beef production will contract for the fifth consecutive year in 2012, according to USDA forecasts. This tight supply is likely to push beef prices higher in Australia's key competitor markets, notably the US and South America.

While cattle prices are expected to ease during 2012, NAB predicts an improvement in lamb prices from current levels. Historically, tight global supplies are the underlying factor in the expected price rise.