A$ Brings Pain For Red Meat Exporters

AUSTRALIA - The situation facing Australian red meat exporters deteriorated even further this week, as the Australian jumped above 110 US cents on the back of higher than expected June quarter inflation figures and the ongoing debt impasse in the US.
calendar icon 29 July 2011
clock icon 2 minute read
Meat & Livestock Australia

Unfortunately for beef exporters, the recent kick in the Australian dollar could not have come at a worse time, with most markets already very soft, as economic and financial concerns take precedent, Meat and Livestock Australia analysts say.

For exporters focussed on Japan, the high Australian dollar only accentuates what has become an extremely tough market since May, with the combination of increased US competition (assisted by their weak US dollar), sluggish consumer demand, and most recently, concerns surrounding radioactive beef.

Since the start of April, indicative chilled beef returns for Australian beef exports to Japan have declined eight to 19 per cent in Australian dollar terms, which has been clearly transferred to lower prices for heavy steers in recent months.

In contrast, the same export prices in US cents/lb terms have only declined one to 10 per cent, illustrating the impact for Australian exporters from the record high Australian dollar.

The impact of the rampaging Australian dollar is also reflected in the US market, with the indicative 90CL price in Australian dollar terms back 15 per cent in the past three months, compared to only eight per cent in US cent/lb terms. Indeed, while this week's indicative 90CL price in US cent/lb terms was up 20 per cent on the same week last year, for Australian exporters, prices were three per cent below last year.

However, beef is not be the only export focused industry feeling the Australian dollar impact, with lamb exporters also feeling the squeeze. Australia's two largest export destinations for lamb are the Middle East and the US, with the record Australian dollar serving to erode affordability in what are very competitive protein markets.

With many of the factors that have fuelled the record run of the Australian dollar in recent years unlikely to subside in the short term, Australian red meat exporters will again be looking for a rise in global beef and lamb prices to improve returns - as was experienced in late 2010 and early 2011.

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