TheCattleSite.com - news, features, articles and disease information for the cattle industry

News

Rapid Decline in Australian Beef Herd

11 February 2015

ANALYSIS - Having seen an unprecedented number of cattle sent for slaughter and live exports in 2014, the Australian cattle industry is likely to see significant adjustments over the coming years.

The Australian cattle industry projections for 2015 from Meat and Livestock Australia show that the high turn-off has had a dramatic impact on the national herd, estimated to have declined from a 35 year high to a two decade low, in the space of just 24 months.

The effects from this are likely to last up to 2020, according to MLA analysts, impacting available supplies, while at the same time, testing market willingness to compete for limited product.

Although the decline this year is expected to be dramatic, production levels are anticipated to be in line with the 10 year average.

“Regardless, having come from such supply highs, an adjustment across the supply chain is inevitable, having a range of consequences, including how cattle and boxed beef will be balanced between new and existing customers,” the MLA report says.

In 2016 further supply shortages are expected.

Beef export prices last year were at record highs and are forecast to remain strong over the coming 12 months – given current low US beef production and strong global demand, assisted by a devaluing Australian dollar.

As Australian supplies are likely to decline over the next two years, MLA says that there will be potential for farm gate prices to rise.

This has been exemplified by the recent sudden jump in prices, following widespread rainfall over the Christmas period.

The analysts said that after persistent hot and dry conditions during 2014 – officially Australia’s third-warmest year on record – a slow phase-out of drought is expected to occur this year.

The Bureau of Meteorology’s latest three month rainfall outlook indicates that conditions for January – March will be moderate for much of the eastern states, while conditions in the west are likely to be drier than average.

This comes after widespread summer rainfall activity across much of the eastern states, providing producers with some short-term relief leading into autumn.

The Australian dollar is expected to stay lower against the US dollar in 2015, trading between 80-82US¢. Despite averaging 90US¢ in , down seven per cent year-on-year, the Reserve Bank of Australia indicated that the Australian dollar remains above estimations of its fundamental value and “further exchange rate depreciation was likely to be needed to achieve balanced growth in the economy”, with some chance of easing monetary policy in coming months.

However, MLA says that overall, economic conditions are expected to improve in 2015 as the global recovery continues.

Weaker than-expected global activity over the last year has seen the IMF’s global growth projection for 2015 lowered to 3.8 per cent. The strongest rebound is expected in the US and South East Asia, while growth in the EU and Japan will be moderate. China will continue on its upward trajectory, albeit at a slower rate as it moves towards a more sustainable growth path.

Given the strength of the US market in particular, and under the assumption of tighter Australian beef production, an export market realignment is forecast, with a greater proportion of exports going back towards the larger, traditional markets of the US, Japan and Korea.

MLA said that the domestic market looks likely to remain under pressure.

On the live export front, demand is likely to remain robust, with the live trade continuing to contribute an important portion of turn-off. With fewer cattle available, and assuming uninterrupted market access, the South East Asian markets, in particular Indonesia, Viet Nam and Malaysia, should continue dominating the trade for both feeder and slaughter cattle.

As Australia will come out of drought over the coming 12 months, a greater proportion of production and exports will occur in the first half of the year, before easing in the final two quarters.

Further Reading

You can view the full report by clicking here.

Chris Harris

Chris Harris

Top image via Shutterstock



Our Sponsors

Partners


Seasonal Picks

Charismatic Cows and Beefcake Bulls