October 19, 2009

Australia's beef industry will benefit from a return to growth in consumer demand for animal proteins, as the world emerges from the global financial crisis, but a number of challenges still remain, according to a Rabobank report.

There are unlikely to have any major price increases in the short term, as beef prices are held back by some fundamentals, including the strengthening Australian dollar and the Reserve Bank's decision to increase interest rates, said report author, Rabobank senior analyst Wendy Voss.

The International Monetary Fund (IMF) forecasts global economic growth to improve from late 2009 for many of Australia's major beef markets, such as the US and Japan, with the recovery expected to be modest in the first half of 2010.

The saving mentality that has now instilled into many consumers as a result of rising unemployment and a plunge in housing and asset values is likely to limit beef demand growth in the short tem, particularly for premium cuts, Voss said.

Japan's unemployment reached record highs in July, and the expected strong seasonal rise in beef demand there in the second half of 2009 has failed to materialise, she said.

Australia's competitor, the US, is also facing growth challenges. 

The report said while falling demand has affected the US cattle industry, the grain price shocks experienced since 2006 have had an equal or even greater impact.