Australia: beef outlook is positive despite natural disasters
07/02/2011
The states of Queensland, Victoria, Tasmania and Western Australia have all been hit by serious flooding in January and February 2011. In Queensland alone, the cost of the floods to the economy was estimated at $10 billion at least. Queensland was also hit by Cyclone Yasi in early February, with the storm causing livestock and crop losses valued at a further $1.6 billion.
Releasing Meat & Livestock Australia's 2011 Cattle Industry Projections, Tim McRae, MLA's manager for market information and analysis, said while the outlook for grass-fed producers in 2011 is encouraging, times will remain tough for the grain-fed sector.
“With the unfortunate exception of southern Western Australia, drought-breaking rains and above average cattle prices provide an opportunity for financial improvement for grass-fed producers, particularly breeders,” he said. “Looking ahead, the fundamentals indicate that we are entering a period of rejuvenated demand, lower global beef stocks and higher prices, which will help offset the impact of the currently high Australian dollar. But in the grain-fed sector, rising grain and feeder cattle prices, the sluggish Japanese grain-fed market and high Australian dollar will put a squeeze on margins.”
Mr McRae said that although markets and prices are expected to be stronger this year, producers still face some difficult decisions. He said: “Producers now have a tough balancing act on their hands: rebuilding their drought and in some cases flood-depleted herds while at the same time maintaining cash flows, reducing debt and capitalising on the expected better markets. Most of the world’s major cattle herds are declining at a time when demand is increasing. Already this year we've seen US choice fed cattle prices 25% higher than a year earlier, a tangible sign of the supply-demand imbalance.”
Australian beef and veal exports in 2011 are forecast to reach 953,000 tonnes, up 3% on 2010. Much of this growth is expected to occur in emerging markets, led by Russia, Middle East and South East Asia. US competition in North Asia is expected to further intensify and may see Australian exports fall in Korea, but remain steady in Japan. Exports to the US are expected to post a modest recovery as local supplies tighten.
Despite surging export markets, demand in the domestic market is expected to remain resilient, underpinned by population and income growth.
With the easing of the drought the Australian cattle herd is forecast to enter an expansion phase, increasing by 2.6% in 2010-11 to 27.4 million head. Beef and veal production is forecast to rise 2.5% in 2011 to 2.19 million tonnes, due to higher slaughter and increased average carcass weights, a result of the improved seasonal conditions.
Market access conditions will continue to drive the live cattle trade in 2011, as the trade remains constrained by the restrictions in Indonesia. The Middle East is anticipated to offset some, but not all, of this impact.
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