February 20, 2004

Australian Cattle Markets Hit By Rising Australian Dollar and Falling Japanese Prices

The slump in Australian cattle markets stem from rising Australian dollar coupled with falling Japanese prices.  

With US grainfed beef no longer competing directly with Australian product on world markets, the key drivers of Australian cattle prices are prices to Japan, the A$ and manufacturing beef prices in the US (particularly 90CL). 90CL prices to the US remain high. 

Other, more minor, factors have been weaker consumer demand in Korea, falls in prices for cuts and fatty trim beef in the US and the extraordinarily hot dry conditions in southern Australia. 

Australia has exported record volumes of beef to Japan since the initial 35-40% jump in export prices in January.  This has been sufficient to pull export prices to Japan back to pre-BSE levels (which were already high), particularly for grassfed beef.  Adding to this fall has been a seasonal decline in Japanese demand and imminent fall in the Japan safeguard tariff. 

Markets can be expected to improve once Japanese demand recovers.  The first trigger could be in early March, as product purchased at that time will reach Japan after 1 April, when the tariff falls from 50% to 38.5%.  Japanese demand also normally picks up in late March/April to supply the increased demand during Golden Week.  Korean demand is also expected to begin recovering soon.  Other potential positive influences are expected lower supplies following rain, and the opening of the Mexican market to US product (likely in March).