August 13, 2007

Challenges abound Australian cattle industry

The high Australian dollar, sluggish export demand and drought are the current obstacles Australian cattle and beef industries have to face, according to Meat and Livestock Australia's Cattle Industry Projections 2007 mid-year update.

Lower cattle and beef prices and higher production costs have squeezed margins in all segments of the supply chain, including producers, lot feeders, processors and exporters.

The high Australian currency along with US' gradual return in North Asian market is expected to put pressure on Australian beef and its prices for 2007/2008.

Despite the expected modest cattle price falls in the short term, grazier and feedlot incomes should improve once the drought ends - with a lift in productivity and reduced expenditures, particularly on feed and feeder cattle.

The beef cattle industry has survived the latest severe drought remarkably well, with only an estimated 600,000 head or 2.1 percent fall in the national herd, to 27.9 million, thus, putting a drop in cattle and beef production at a modest growth of 2 percent in 2007 and 1 percent in 2008 before expanding steadily from 2009.

The impact of the US return on Australian sales to Japan is expected to be only modest, however, fierce competition is anticipated in the Korean market. The fall in shipments to North Asian markets is expected to be largely picked up by a strengthening US market and South-East Asia, leaving beef exports down 1.5 percent in 2007 (from the 2006 record) and a further 4 percent in 2008.

Domestic beef consumption is forecast to rise, despite lower supplies, as demand at retail and foodservice remains firm and competition from exporters wanes, reaching 760,000 tonnes (35.8kg/person) by 2008, up 3 percent on 2006.