ABARES says it is unlikely that alternative export markets will be found in the short term for the large numbers of northern cattle not shipped to Indonesia as a result of the country’s severe quota cutbacks this year.
The elephant in the room for live export markets in 2012 is whether the dominant market of Indonesia will hold firm to its announced import quotas of 283,000 head, which is close to half of the 500,000 head quota it allocated in 2011.
If Indonesia strictly enforces its reduced quota limit when it releases its second quarter permits, expected to occur at any time, it will underpin a 31pc year-on-year fall in total live cattle exports from Australia for the current financial year which ends on June 30.
Alternative markets will ultimately have to be found for the lighter steers and heifers from northern Australia that are produced specifically for Indonesian market specifications but not exported to the market due to quota cutbacks.
Indonesia issued quota for 60,000 head in the first quarter, which was 30,000 head less than the volume Australia exported to the market in the first quarter of 2011.
The ABARES forecast suggests that most cattle that do not go to Indonesia will ultimately end up on domestic markets, because there are few signs to indicate that Australia is likely to significantly increase exports to other markets this year.
Australian exports to Turkey are facing greater competition, as the Turkish Government has recently allowed imports of cattle from Mexico, Hungary, Romania and France.
While it was possible that a limited number of cattle originally destined for Indonesia may be redirected to countries such as Malaysia and the Philippines, strong competition from lower priced Indian buffalo meat and Latin American beef was also competing in these markets.
“In the short-term, it is unlikely that a significant number of cattle originally intended for export to Indonesia can be redirected to other markets,” ABARES’ Clay Mifsud forecasts in the latest commodity report.
“In 2010–11, all cattle exported to Turkey, Israel, Saudi Arabia and the Russian Federation were sourced from southern Australian ports, indicating a preference for bos taurus cattle.
“In addition, many of these markets generally import cattle from Australia that are close to slaughter weight because they lack large-scale feedlot infrastructure for finishing cattle prior to slaughter.”
Currency movements were also making life harder for Australian exporters.
The currencies of Turkey, Israel, Saudi Arabia and the Russian Federation had all depreciated against the Australian dollar by an average of 8 percent over the past year, making Australian cattle relatively more expensive in those markets.
Australian exporters also now face added requirements to meet OIE animal welfare standards in supply chains, which adds to the costs of Australian exports compared to those from other countries which do not comply to similar standards.
ABARES said it remained uncertain at this stage how these regulations would affect demand for Australian live cattle exports in international markets.
Beyond this financial year, ABARES said growth in live cattle exports will depend on development of new markets for northern Australian cattle, especially if the Indonesian Government strictly enforces the new import restrictions.
Over the past decade, the number of cattle exported from northern Australian ports to markets other than Indonesia has fallen from 293 000 head to 76 000 head.