FEED Business Worldwide - June 2012
Lose Japan, gain America: Australian beef gets lucky
by Eric J. BROOKS
After several years of intense competition from the United States, Australian beef faces a challenging year but it still remains more optimistic than it did a few months ago. With the USDA expecting its beef export to rise a nominal 0.35%, the Australian government reported that for the first four months of 2012, exports increased 0.50%. However, while forecasts, both Australian and foreign are conservative, they may require a slight upward revision. This because unexpected events will see fewer Australian beef exports to Northeast Asia being counterbalanced by higher exports to North America.
According to the Australian Bureau of Agricultural and Resource Economics (ABARE), first quarter export volumes to Japan and South Korea decreased 2.4% and 2.1% respectively. That was due to intensifying competition from American beef in both countries and Canadian beef in South Korea, as the latter recently signed a trade liberalization pact with Canada. In addition, the Australian currency's relentless appreciation versus the US dollar has made American beef increasingly enticing to wealthier East Asian customers.
Exports boosted by US drought
But several factors are bolstering Australian beef's market position. The nation's cattle ranchers are receiving help from of all places, the United States. First, while US beef has been gaining popularity worldwide, this did little to raise American cattle ranching's rate of return. A persistent drought in America's southern Great Plains caused US cattle numbers to fall to their lowest level since the 1950s.
This is making it increasingly difficult for the US to satisfy both its domestic and export demand for beef â€“but US beef enjoys higher prices and returns overseas than in America itself. This means that if there's not enough US beef to satisfy both foreign and domestic demand, American beef will be diverted into exports, while imports flow in to fill the resulting supply shortage.
As a result, the USDA has already penciled in for Australian beef exports to the United States to rise by 6% this year and another 6% in 2013. The preference for Australian beef is underscored by the fact that in recent years, the US and EU had hygiene and food safety issues with beef imports from Brazil and Uruguay.
But since those projections were made, two more unexpected events have further improved Australian beef's export prospects.
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