September 24, 2010

Australia sees positive 2010-11 beef market outlook

The outlook for the Australian beef industry looks bright in 2010-11, with average cattle prices, export volumes and values all forecast to average higher, while total adult cattle slaughter remains unchanged on-year, said the Australian Bureau of Agricultural and Resource Economics (ABARE).

Average weighted saleyard cattle prices for 2010-11 are forecast to average 4.5% higher on the previous year (an average of trade steers, cows and heavy steer prices for 2010-11, weighted by the proportion of male and female cattle slaughter for the year).

With the excellent season across the eastern states so far in 2010-11, robust demand for young cattle has pushed saleyard returns to the highest levels in four years. For the 12 weeks since the start of the 2010-11 fiscal year, national trade steer prices averaged 5% above the corresponding period in 2009-10, while cows and heavy steers were up 7% and 3%, respectively.

Following a very tough 2009-10, Australian beef exports are forecast to slowly start increasing, rising 1% for 2010-11, to 920,000 tonnes swt. Exports to Australia's two largest markets, Japan and the US, are forecast to rise 3% and 14%, to 360,000 tonnes swt and 240,000 tonnes swt, respectively. However, it must be noted that the 14% increase to the US is more reflective of a very low 2009-10, which at 210,000 tonnes swt, was the lowest fiscal year total since 1996-97.

Interestingly, average indicative imported beef prices to both Japan and the US for 2010-11 are forecast to increase in US¢/kg terms, rising 2% and 10%, respectively. However, for Australian exporters, any benefit from higher prices in these markets could be erased by a higher Australian dollar. However, even with the strong currency, ABARE has forecast the total value of beef and veal exports to increase 10% in 2010-11, to A$4.4 billion (US$4.18 billion).

Given the improved season across most key cattle producing regions, the Australian cattle herd is forecast to expand 0.7% for the year, to 28.4 million head, as many producers take steps to start rebuilding drought depleted herds.