September 8, 2011

Australian beef exports remain strong amid weak US dollar

Despite a weaker US currency which raises the Australian monetary value, Australian beef exports are still robust after a midyear slow down, said Tim McRae, chief economist at marketing concern Meat & Livestock Australia Ltd., Wednesday.

McRae said a two-week shutdown of Brazilian meat processor JBS SA's (JBSAY) premier Beef City export abattoir in Queensland in July underscored how difficult conditions have been in the industry.

Almost two-thirds of Australian beef production is exported, making overseas demand an important influence on the price of cattle and farm incomes in Australia. The country is the second-largest beef exporter in the world after Brazil, with annual exports worth US$4.76 billion. Australian beef exports in the first eight months of 2011 rose 0.7% on year to 611,603 boneless tonnes.

Steve Martyn, national director for processors at the Australian Meat Industry Council, a services concern, said exporters remain globally competitive despite the strong currency.

Martyn said that while exports are hurting the industry, volumes for the domestic are increasing as the industry tries to maximize returns.

He added that business gets difficult when exchange rates get to a lower level as Australia isn't the lowest-cost operator but still a major player in the world beef trade.

David Inall, executive director at the Cattle Council of Australia, said export volumes this year are a testament to the resilience of the industry and concerns expressed earlier this year about a crash in export volumes or prices haven't materialized.

Inall said the industry is still exporting boxed beef to more than 100 countries and that forecasts remain strong as the next three to four years are seen to be "rosy" for the Australian cattle industry.

MLA's McRae said a key factor supporting exports is increasing diversification of markets. In 2005, more than 90% of beef shipments went to the three big markets of Japan, the US and South Korea, but this year these three markets only account for 70% of exports, with increasing tonnages destined for Russia as well as markets throughout the Middle East and Southeast Asia.