Australia’s official commodity forester expects Australian saleyard prices to rise by three percent in 2013-14 to average 305c/kg dressed weight, as emerging markets drive export growth and restocker demand reactivates in the south.
Australian Bureau of Agriculture and Resource Economics and Sciences’ latest commodity forecast released yesterday suggests northern cattle markets will continue to come under pressure from high supplies of slaughter cattle as deteriorating seasonal conditions drive further destocking in 2013-14.
However it believes southern prices will improve as restockers buy more cattle to increase herds after the high slaughter rates of the past 12 months, which in turn will push overall national saleyard price averages higher by around 3pc.
An assumed lower Australian exchange rate compared to 2012-13 is also expected to improve the price-competitiveness of the two-thirds of Australian beef production that is exported in overseas markets.
While demand from Australia’s largest market, Japan, is expected to continue to decrease, this is likely to be offset by improved demand from the United States as well as emerging markets in China, South-East Asia and the Middle East.
Slaughter and production to rise
ABARES expects Australian cattle and calf slaughter to increase by 3pc in 2013–14 to 8.7 million head, underpinning an increase in beef and veal production to
2.3 million tonnes.
For the nation as a whole, cattle inventories are expected to fall by 2per cent to 27.8 million head by June 2014.
Emerging markets to drive export growth
Australian beef and veal exports are set to grow by a further 6pc in volume and value terms 2013-14 to 1.07 m t shipped weight.
This will be driven by an assumed improvement in the price competitiveness of Australian beef in export market due to a lower $A, by increased demand from the emerging markets of China, South-East Asia and the Middle East.
Japan sales down
Australian beef and veal exports to Japan are forecast to fall by 5per cent in 2013–14 to 285, 000t, reflecting increased competition from US beef.
While Japan is expected to import the same volume of beef this financial year as last year, the proportion of US beef imports is expected to continue rising.
US beef exports to Japan have increased substantially since the Japanese Government’s decision in February 2013 to relax bovine spongiform encephalopathy (BSE) related import restrictions.
As a result, the proportion of US beef production eligible for the Japanese market increased from less than 50per cent to more than 90per cent.
Japanese beef imports from the United States can now be sourced from cattle slaughtered at up to 30months of age; previously a restriction had been in place limiting beef imports from cattle slaughtered at less than 21 months of age.
Strong growth in US beef exports to Japan is expected to continue over 2013–14 as the Japanese market offers US exporters favourable returns compared with most other markets.
Increased exports to United States
Australian beef and veal exports to the United States in 2013–14 are forecast to increase by 11pc to 230,000t.
Higher exports to the US reflect forecast lower domestic supply of manufacturing beef in the US and an assumed depreciation of the Australian exchange rate.
Production of US cow beef, a major competitor of Australian lean manufacturing beef in the market, is expected to fall in the United States in 2013–14 resulting in increased demand for imports.
Improving seasonal conditions in the United States have resulted in the proportion of pastures rated as being in fair to excellent condition reaching 64per cent in September 2013, compared with 42per cent in September 2012.
As a result, liquidation of US beef cow herds is expected to slow. In addition, slaughter of dairy cows is expected to fall in 2013–14 because of an expected increase in the milk-to-feed price ratio.
Increased demand for imported manufacturing beef is likely to offer additional incentive for Australian exporters to divert beef to the US market. An assumed lower Australian exchange rate would result in prices to Australian exporters increasing at a faster rate than in US dollar terms.
Despite these developments, ABARES says beef exports to the United States in 2013–14 are not expected to exceed the 10-year average of 267.000tonnes.
“The opportunities in new markets for Australian manufacturing beef in Asia and the Middle East is expected to constrain, to some extent, growth in Australian beef exports to the United States,” ABARES said.
Korea exports to lift
Australian beef and veal exports to the Republic of Korea are forecast to increase by 3per cent in 2013–14 to 142,000t, reflecting reduced supply of US beef in the Korean import market and the lower assumed value of the Australian dollar.
Since the Japanese Government eased restrictions on imports of US beef in February 2013, US exports to Japan increased by more than 50per cent year-on-year and exports to the Republic of Korea decreased.
Exports of US beef to the Republic of Korea are expected to be lower again in 2013–14, reflecting more favourable returns to US beef exports in Japan.
The tariff differential between Australian and US beef in the Korean market will increase to 8 percentage points on 1 January 2014 in the United States’ favour.
Rising beef prices in China supporting imports
In 2012–13 China became Australia’s fourth largest export market for beef, taking 92,000t.
Growth in exports to China is forecast to moderate in 2013–14 to a year-on-year increase of around 40per cent to 130,000t.
Growth in domestic beef prices in China has begun to slow after the significant increase in imports from Australia and New Zealand.
Australia’s share of Chinese beef imports is expected to rise in 2013–14 as Brazilian beef—previously a key competitor to Australia—remains banned in China because of detection of bovine spongiform encephalopathy in that country.
Compared with a decade ago, the Chinese market is taking a wider variety of Australian beef cuts, with a higher average value.
So far in 2013–14 the top three beef cuts exported to China were shin/shank (with a share of 20per cent), brisket (18per cent) and silverside/outside (12per cent). This compares with 2003–04 when more than two-thirds of beef exports to China were of lower value manufacturing beef.
Rising demand in South-East Asia
In 2012–13 Australian beef and veal exports to South-East Asia increased by 5per cent to a record 94,000t as increased exports to the Philippines, Malaysia, and Singapore offset lower exports to Indonesia, as it pursued self-sufficiency goals.
In 2013–14 Australian beef exports to South-East Asia are forecast to increase by 6pc to 100,000t as demand for beef rises faster than local production, and Indonesia’s disbanded import quota system points to the likelihood of import increases ahead.
Exports to the Middle East rising
Australian beef exports to the Middle East rose by 52pc to a record 48,000t in 2012–13, driven by increased demand from Saudi Arabia after the Saudi Government banned imports of Brazilian beef following the detection of BSE in that country.
With no date established for the re-entry of Brazilian beef into Saudi Arabia, Australia’s beef and veal exports to the Middle East are forecast to increase by 15pc to 55,000t in 2013-14.