December 20, 2004

ABARE Maintains Positive Beef Outlook in Australia

The Australian Bureau of Agricultural and Resource Economics (ABARE) have maintained forecasts of a marginal rise in the Australian cattle herd, while revising up production, prices and exports for the 2004-05 financial year. In the December quarterly update, ABARE have forecast the Australian cattle herd at 26.6 million head as at 30 June 2005, up 200,000 head from 30 June 2004.

ABARE's forecasts for the industry are generally more positive than those released in September, due to an assumption that significant beef trade between the US and Japan does not restart until mid-2005 (previously this was assumed to be from December 2004).

The revision was in response to the framework agreement reached between the two countries in October 2004. This assumption is dependent upon Japan lifting their requirement that age verification of cattle can only be by birth records. If this requirement is not lifted, trade between the two countries will remain at small volumes throughout 2005.

Consequently, Australian cattle prices, production and exports have all been revised up. Cattle prices, which averaged 290A¢/kg in 2003-04 are forecast to increase to A301 cents/kg in 2004-05, which is up 18% from 2002-03. Australia is expected to maintain high levels of grainfed beef production, which in turn will lift total production by 1.5% from 2003-04, to 2.06 million tons cwt in 2004-05. Beef exports, which were forecast to fall 3.4% in the September report, are now expected to lift 1.7% in 2004-05 to 875,000 tons sw.

The major lifts in beef exports will be in Japan (up 5.1%) and Korea (up 6.7%) in 2004-05, reaching 348,000 tons sw and 80,000 tons sw, respectively. Both these forecasts look conservative, considering the volumes sent in the first half of the year. Exports to the US are forecast to fall 1.1% to 357,000 tons sw in 2004-05, implying it is unlikely Australian will reach their annual quota in 2005.