The Federal Government’s economic forecasting agency ABARES suggests the national beef herd will start to retract in the 2013-14 financial year, ending a three-year growth cycle, while beef exports will expand another five percent on top of this year’s record volume.

The predictions are contained in ABARES latest June quarter agricultural commodity forecasts released yesterday.

The Bureau expects the Australian cattle herd in 2013–14 to fall by 1pc to 27.9m head as producers continue to destock – effectively ending earlier, more seasonally-optimistic suggestions that the herd would push past 30m head by 2016.

That follows an estimated 1pc decline in the national beef herd this current financial year, ending June 30, to 28.1m head, reflecting increased cattle slaughter brought on by dry/drought conditions.

ABARES says cattle and calf slaughter in 2013–14 should increase by a further 4pc to 8.7 million head. The proportion of female cattle in the kill is expected to rise as producers continue to destock.

Higher cattle slaughter will underpin an expected 3pc increase in beef and veal production to 2.3 million tonnes. Increased export demand from the US and emerging markets such as China, the Middle East and South-East Asia is forecast to contribute to the increased cattle slaughter and beef production.

Beef exports are estimated to increase 5pc next 2013-14 financial year to 1.07 million tonnes, in response to increased demand from the US and emerging markets. That comes on top of record 2012-13 shipments, currently anticipated at 1.015mt.

Relatively low growth in domestic demand for beef has resulted in most of the increase in production being exported. An assumed lower A$ is also expected to improve the competitiveness of Australian beef in export markets. The value of beef exports in 2013–14 is tipped to increase by 5pc to around $5.1 billion.

Increased competition from US beef in Japan

Australian beef exports to Japan are tipped to fall by 7pc to 280,000t in 2013–14, on top of an 8pc decline this year, reflecting increased competition from imports of US beef. Since February this year exports of US beef to Japan have increased to their highest level in 10 years, coinciding with changes to age-related import policies made by the Japanese Government.

Total beef imports in Japan are expected to stay relatively unchanged, but the share of US beef in the market should continue rising at the expense of Australian beef.

Increased exports of US beef to Japan are unlikely to significantly affect exports of Australian frozen grassfed beef over the coming year, however. This beef is used mainly in the foodservice sector to produce ground beef, and is imported into Japan at a significant price discount to US beef.

US beef imports to rise 1pc

Beef and veal exports to the US in 2013–14 are forecast to increase by 10pc to 230,000t, as the supply of cow beef in the US declines and import prices rise.

US cow slaughter is expected to fall over the coming year, which would result in lower domestic supplies for the grinding beef market and increased demand for imports. In particular, slaughter of US dairy cows in 2013–14 is expected to decline compared with the previous year.

The increased US demand for imported manufacturing beef, and an assumed lower A$ is likely to lead to an increase in the 90CL imported beef price in A$ terms, ABARES says.

Australian exports to the US this year have been facing greater competition from New Zealand, due to drought-influenced dairy and beef cattle turnoff in NZ.

Greater supply from NZ put downward pressure on US import prices, which resulted in some Australian exporters temporarily redirecting exports of manufacturing beef to other markets, such as China, where average export returns were higher.

Korea growth prospect

Beef exports to Korea could rise by 4pc in 2013–14 to 142 000t, on top of an 11pc rise this year, ABARES says.

Frozen exports are likely to increase over the coming year as demand in Korea continues to rise, partially offset by lower volumes of chilled beef because of increased competition from the US.

This reflects the competitive pricing of Australian frozen beef in the Korean import market. Over the first 10 months of 2012–13, the landed price of Australian frozen beef in Korea averaged US$4.14/kg, 16pc less than the equivalent beef from the US. In comparison, Australian chilled beef averaged 6pc less than US product over the same period.

30pc more trade into China

ABARES is forecasting further Australian export growth into China next year, likely to reach 120,000t, up about 30pc on trade for the current year ending June 30 (92,000t).

Since September 2012, monthly exports to China have averaged 9000t, compared with 500t over the previous five years.

China has become the fourth largest market for Australian exports in 2012–13. The significant increase reflects a number of factors, including increased numbers of Australian processors eligible to export to China, changes to Chinese Government import regulations, and greater Chinese demand for imported beef.

The number of Australian processing facilities approved to export to China has increased by more than 20 over the past 12 months. In contrast, imports from Canada are restricted to boneless beef from four meat processing plants, while imports from the US and Brazil are banned.

Between January and April 2013, Australia accounted for 47pc of Chinese beef imports, with Uruguay and NZ 25pc and 19pc, respectively.

South-East Asia, Middle East to rise

Exports to South-East Asia in 2013 are forecast to increase by 5pc to 100,000t.

Growth in demand for beef in the region is expected to exceed growth in domestic production, leading to increased imports, including from Australia.

This year, increased exports to the Philippines, Malaysia and Singapore have more than offset a 24pc decline in exports to Indonesia, which are restricted by the Indonesian Government’s maintenance of a quota on beef imports.

Australian exports to the Middle East next in 2013–14 are also expected to grow by a further 6pc, on top of a spectacular 52pc rise this year, to 50,000t. This partly reflects bans placed on imports of beef from Brazil and the US.

Cattle prices to ease 5pc

ABARES forecasts the Australian average saleyard price to fall by 5pc next financial year to 280c/kg dressed weight.

Increased supplies of slaughter cattle into saleyards and lower demand for restocker cattle are expected to continue placing downward pressure on cattle prices.

Internationally, demand for lower value frozen beef is expected to continue rising, while demand for higher value chilled beef is expected to fall. This is likely to adversely affect average export prices, which will in turn place downward pressure on domestic saleyard prices.

ABARES estimates average Australian cattle prices during the current year ended June 30 have fallen by 10pc to 296c/kg – the lowest yearly average in real terms since 1998–99.