Australian Beef Back in Demand

AUSTRALIA - The Australian beef industry is likely to have weathered the worst of the turbulent trading conditions arising from the global economic and financial crises, with early signals that beef demand is staging a comeback according to Meat & Livestock Australia’s (MLA) 2009 Cattle Industry Projections – Mid Year Update, released today.
calendar icon 10 August 2009
clock icon 4 minute read
Meat & Livestock Australia

However some factors could hinder the speed of recovery: the direction of the Australian dollar, whether the southern drought recedes and the timing of a turnaround in global economies.

Domestic and global beef demand was more severely impacted by the global economic and credit crises over the first half of 2009 than was previously anticipated. However, there is now growing consensus that global economies will stage a recovery from later this year, arresting the slide in consumer demand for beef.

In launching the cattle projections, MLA economist Tim McRae highlighted that some of the necessary pre-conditions required to re-ignite demand are starting to surface.

“World economic bodies are forecasting improved economic conditions for later this year, beef stocks in key markets are dwindling, lower import prices are starting to be passed through to consumers in Japan, and the Korean market is recovering from the period of instability created by the return of US product.”

“MLA predicts that export demand will start to rally in the second half of 2009, further aided by a seasonal increase in demand from Japan and Korea,” Mr McRae said.

Mr McRae cautioned that not all the stars are yet aligned for a complete recovery this year.

“Exporters are still grappling with tight livestock supplies, the appreciating Australian dollar, weak co-product prices and low import prices. It probably won’t be until 2010 that exports will start to really gather steam, when volumes are forecast to approach the one million tonne swt mark, as the Japanese, Korean and US economies revert to growth.”

Improved demand over the latter part of 2009 is likely to coincide with tight beef supplies on the back of improved seasonal conditions and herd rebuilding activity – an imbalance which may cause cattle prices to rise, depending on the direction of the A$ and spring rains. “The volatility in cattle prices witnessed last year – which saw prices peak in October and then fall 10-18 per cent over the remaining months of the year – is unlikely to be repeated this year, assuming no unanticipated shock,” Mr McRae said.

“This year’s price peak for cattle is expected to be more restrained than last year’s; however, prices over the latter months are likely to be higher than in 2008.

“This will leave average cattle prices for 2009 close to those of 2008, a good result for producers, given the deeper global recession, much higher A$ and more adverse southern season than were assumed in the January projections.”

Beef and veal production in 2009 is predicted to fall 2.5 per cent on 2008, in contrast to the small rise forecast in MLA’s projections in January – a result of lower than expected feedlot output; lower offer prices; lighter average carcase weights; and improved seasonal conditions – in the north and more recently in the south – encouraging producers to rebuild herds.

The Australian cattle herd is forecast to expand to 28.4 million head by June 2010, up 2.3 per cent from 2009 and building towards 30 million by 2013.

The full impact of herd rebuilding on turnoff, season permitting, is not expected until at least 2011, with beef production in 2010 rebounding from this year’s lower level but only back to levels seen in 2006 and 2007.

Tighter production and an increased portion of beef heading for export markets is expected to see Australian beef consumption fall 5 per cent in 2009. However, over the medium term, consumption is expected to increase, boosted by a recovery in demand and higher beef production.

Reduced cattle availability in 2009 will also take its toll on the live export trade, with exports forecast to fall 3 per cent despite strong demand, particularly in Indonesia and the Middle East. However, as cattle supplies are restored, exports are expected to rise to 925,000 head by 2013, up 8 per cent on 2008.

“Over the medium to long term, Australia’s slowly expanding beef production is forecast to be met by rising global demand, especially as economic conditions improve in Australia’s major beef markets,” Mr McRae said.

“The tighter supply of beef globally should continue to put upward pressure on beef prices, with food inflationary pressures returning in the medium term.”

TheCattleSite News Desk

© 2000 - 2024 - Global Ag Media. All Rights Reserved | No part of this site may be reproduced without permission.