May 28, 2007

Australia's AAC to bank on beef quality despite poor earnings on strong currency, tough competition

Export earnings of Australian Agricultural Co Ltd (AAC)-Australia's largest cattle rancher-are being hit by a strong currency at a time is facing tougher competition for beef sales in north Asian markets, the company said.

AAC chairman Nick Burton-Taylor, however, said the company has started the current year on an optimistic note due to good seasonal conditions despite the stronger currency and market competition. 

The positive outlook was further pulled by the company's ranches strategic higher rainfall areas that somehow alleviated the havoc created by the prolonged drought which have severely affected cattle production in Australia.

AAC's ranches cover more than one percent of Australia's land mass.

Burton-Taylor more Australian beef exporters need to defend its territory on the global market as the re-entry of US beef particularly to Japan and South Korea have posed stiffer challenge in the beef trade.

He said US beef available to the North Asian markets will be from cattle of a younger age, thus limiting US beef exporters' to supply full range and should give Australians a big change to corner more opportunities.

Higher corn prices in the US as a result of dramatic increases in ethanol production have lifted the US cost of production for all its meat protein, including beef, he said.

AAC chief executive Don Mackay said demand for Australian beef internationally remains strong though there a pressure to South Korea is being applied by the US which expects significant volumes of US beef to the South Korean market in the coming months.

Offsetting this increase in volume, Mackay said, there is continuing demand for quality beef in South Korea which has remained unsatisfied from limited Australian exports as Australia's standing as a major beef supplier is currently stable.

(US$1 = A$1.22 )