June 16, 2011

 

Australia unmoved amidst Indonesian cattle trade turmoil

 

 

In spite of the widespread beef industry commotion surrounding the prohibition of live cattle exports to Indonesia, the Australian agribusiness industry remains firm on their stance.

 

"At this point, there is nothing on the horizon that is alarming us as far as wholesale change in the beef market is concerned," said Commonwealth Bank's regional and agribusiness executive general manager, Brendan White.

 

The big Australian Agricultural Company's (AACo) beef empire has quickly turned its attention to fast-tracking plans to build its own abattoir in Darwin to process cattle, while also redirecting stock previously destined for the Indonesian trade back into grazing programmes.

 

The abattoir, which may now be bigger than originally planned, is due to be commissioned in the second half of next year.

 

AACo is also hoping the federal and Northern Territory governments may now help speed up construction of the plant.

 

Despite management downgrading AACo's projected earnings by a big 23%, based on lost export opportunities to Indonesia, the company's share price early this week was down just AUD0.04 (US$0.04) a share on its pre-export ban value of AUD1.46 (US$1.54).

 

Shares in leading farm service and live export player, Elders, have also traded slightly lower at around AUD0.42 (US$0.44) this week, but market observers described the movements as in line with the overall weak share market during the past fortnight.

 

"I think equity markets have tended to look through the current issue and are pretty much seeing the bigger picture for the time being," said an agricultural stocks analyst.

 

ANZ banking group highlighted the bigger picture by pointing out that live cattle exports to Indonesia only represented 0.1% of Australia's total national export earnings last year and the trade was already down from its peak in 2009 to represent about 65% of total live cattle earnings.

 

However, ANZ said although only representing about 9% of Australian beef exports, the Indonesian market's lost sales would cause significant logistical and processing problems as producers diverted a big portion of the export trade into local markets.