Live Export

Projections: Stormy seas still ahead for live exports

James Nason, 23/01/2012

If Australia’s live exporters thought the roughest seas were behind them, they should prepare for another year of choppy conditions in 2012.

Certainly the seas through Meat and Livestock Australia’s telescope don’t look quite as threatening this year as those whipped up by the Federal Government’s high-impact decision to shut down trade to Indonesia for two-months based on animal welfare concerns last year.

That decision accounted for most, but not all, of a 22pc drop in total live export volumes to an estimated 682,000 head in 2011, a significant decline that brought many northern cattle and live export services businesses to their knees.

The rapid resumption of exports to Indonesia under newly-accredited supply chains from August provided much-needed wind for the trade’s sails and fuelled a renewed climate of certainty and confidence throughout the industry as the year drew to a close.

However the anchors dropped again suddenly in mid-December when Indonesia announced its decision to cut annual cattle import quotas for 2012 almost in half compared to 2011, in line with its stated commitment to achieve self-sufficiency in beef production by 2014.

When you depend on a single market for almost 60pc of your trade, the prospects for your business are irrevocably tied to the outlook for that single market.

The number one question for exporters in 2012 is whether Indonesia will stick to the 283,000 head import quota it has announced for this year.

MLA noted in this morning’s outlook that Indonesia is facing pressures from an underlying growing shortage of beef and rising beef prices, and a recently expanded feedlot industry which is now grossly underutilised.

If exports to Indonesia maintain that level, it will represent a 31 percent decline in exports to Indonesia this year compared to last.

It also explains the 16pc fall in total live cattle exports that MLA has forecast for 2012, to a total of 570,000 cattle.

While MLA expects other markets to make up some ground this year, it notes that prospects for other markets to absorb additional cattle that would normally go to Indonesia “are limited”.

Certainly exports to alternative markets fell well below expectations last year and did not provide the solution exporters had hoped they would when trade to Indonesia ground to a halt in June and July.

Total live exports last year are expected to total 682,000 when final data for December is included, 22pc below the previous year.

Indonesia took 410,000 cattle, representing 60pc of the total, but other markets contributed to the overall decline.

In many cases shipments to more price-sensitive markets in South East Asia and the Middle East were constrained by the higher prices for Australian cattle, MLA said, along with supply constraints.

Exports to the Middle East and Africa (including Turkey) totalled 134,000 head, 40pc lower than the previous year.

Behind Indonesia, the next largest markets in 2011 were Turkey (65,500 head), China (43,000 head), Israel (54,000 head) and Russia (30,500 head).

MLA said the longer term traditional markets of Malaysia (12,700 head) and the Philippines (22,000) continued to diminish in volume, as the boxed beef trade from several suppliers increased.

Despite the subdued conditions last year, MLA expects improvements in some of these markets this year with the Middle East and Africa forecast to increase slightly to a total of 155,000 head, and Japan expected to record a lift to 15,000 head. China is forecast to take 45,000 head for the year, the majority of which will be dairy cattle.

Production forecast

With overall export volumes constricted in 2012, generally good seasons are likely to see more cattle accommodated for further finishing and sent south for processing, which will help to partially ease continued tight supplies in local markets, MLA believes.

Much will depend on whether seasons across northern Australia remain favourable and how the 2011-12 wet season finishes.

Processors are expected to see the northern cattle that were unable to be shipped to Indonesia as a result of last year’s ban and diverted instead into local finishing systems in the second quarter of this year.

The constantly shifting market environment meant it was impossible to forecast volumes to selected markets beyond 2012, MLA said.

However it said total exports were expected to increase from 570,000 cattle in 2012 to 800,000 cattle by 2016, assisted by expanding cattle supplies through northern Australia and underlying strong demand and prices through South East Asia and the Middle East/Africa.

“Beyond 2012, Australia’s live cattle trade will be framed by access to import permits to Indonesia, seasonal conditions, the feasibility of exports to price sensitive markets and competition from slaughter markets for suitable young cattle,” MLA said.

  • The full Industry Projections report can be viewed here

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