Rains bring hope of early recovery for Australia's drought-stricken cattle farms

Rains that fell in December and early January have brought sigh of relief to Australia's cattle industry whose production reached rock bottom last year on prolonged dry spell. 

 

The almost yearlong drought wilted Australia's main grazing grounds, with parts of Queensland and South Australia recording their lowest rainfall in 27 months, prompting cattle farmers to sell off or slaughter their animals than letting them die of hunger.

 

Conditions have improved somewhat but Australia is unlikely to meet beef export targets this year since the culling had drastically reduced local cattle inventories.

 

A slowdown in Australian beef exports is expected to trigger spikes in beef prices in markets like the US, China, and Japan.

 

According to Reuters, Australia's Eastern Young Cattle Indicator had reached US$361/kg on January 19, the highest price recorded since the index's debut in 1996, on anticipated supply crunch.

 

The recent change in weather conditions has encouraged Australian farmers, specifically those in Queensland, the country's largest cattle-producing state, to rebuild stocks which had seen a 17-year low.

 

Analysts also added that Australian beef shipment to the US will remain largely unaffected. The US, itself also dealing with constricted supplies, accounts for over a third of Australian exports.

 

Still, Matt Costello, Rabobank's animal proteins analysts, said that there might be sudden changes in slaughter and export figures over time.

 

For now, overall cattle slaughter will drop to about eight million head, based on Rabobank's estimates. Lower slaughter numbers may continue for the next five years.

 

For the 2014-15 period, Canberra expects beef exports at 1.18 million tonnes and a slaughter rate of 9.35 million head.