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Australian Cattle Council : Yearbook 2011
16 YEARBOOK 2011 CATTLE COUNCIL OF AUSTRALIA The increased production in 2011 will largely be utilised in export markets, as demand continues to recover. However, one of the features of the 2011 export projections is that most of the growth will continue to come from outside of the three largest markets. Russia, Indonesia and the Middle East will maintain the trend of recent years of a increased proportion of total exports going to markets other than Japan, the US and Korea. Given the decline in global beef supplies in recent years, and the improvement in demand throughout 2010, global beef prices are expected to increase significantly in 2011. This is already in evidence during the first three months of 2011, with US choice fed cattle prices up significantly year-on-year. Domestic demand for beef is expected to remain solid in 2011, with a small rise in total consumption and expenditure at least stable in real terms, despite stronger competition from exporters. Expected population and income growth sets a basis for steady growth in retail and foodservice demand over the coming five years, though a resurgent export market, and consequent rising prices, could limit further consumption gains. After a mixed 2010, Australia’s live export industry is expected to face another year constrained by artificially restricted numbers to Indonesia. The Middle East is anticipated to offset some of the impact, both in the short and medium term, fuelled by increasing demand for protein and new markets, such as Turkey. However, total numbers for 2011 and beyond will be largely determined by market access conditions, both to Indonesia and many Middle Eastern markets. Overall, the fundamentals of the global beef markets points to a period of rejuvenated demand and higher prices, helping to offset the influence of the A$. Accentuating this will be tight global beef supplies, as most major cattle herds continue to fall, or remain steady at best. Additionally, the potential for significant trade deals with major trading partners (especially Japan and Korea) could add impetus to an already positive outlook for the Australian beef and cattle industry. BEEF EXPORTS Australian beef and veal exports finished 2010 at 922,800 tonnes swt – only 0.5% below 2009. However, it was a difficult and unpredictable export year, impacted by the very slow start to trading, with flooding impacting production and sluggish demand from major markets, not helped by a appreciating A$. Exports were on track to come in at below 900,000 tonnes half way through the year. However, demand and supplies improved throughout the second half of 2010, helping to offset the spectre of the A$ hitting parity. Australian beef exporters felt significant pain from the rise of the A$ during 2010, averaging 16% higher than the previous year, at 92US¢, and it appears things are unlikely to improve on the A$ front in 2011. However, what is anticipated to improve is both demand and most importantly, global beef prices, which should more than offset the blow from the higher currency. In 2010, Japan was easily Australia’s largest beef export market, receiving 356,200 tonnes swt, with the US and Korea in second and third place, with 185,000 tonnes swt and 124,100 tonnes swt, respectively. Exports to Japan were unchanged on the previous year and exports to Korea increased 7% year-on-year. However, the feature was the 26% decline in beef exports to the US, which was due to several factors, including the record high A$. Following the trend started in 2008, the 2010 export year again saw historically high volumes of Australian beef sent to markets other than Japan, the US and Korea – the traditional “big three”. In 2010, 27.9% of Australian beef shipments were sent to markets other than the “big three”, or 257,000 tonnes swt. This compares to 22% and 24% in 2009 and 2008, respectively. In 2004, immediately following the bans on imports of US beef due to BSE, only 8.5% of exports (77,000 tonnes swt) were sent to markets outside of the “big three”. Contributing to the growth to other markets in 2010 was South East Asia (88,800 tonnes swt), Russia (56,700 tonnes swt) and the Middle East (24,300 tonnes swt). Overall, 2011 has the potential to be a good year for Australian beef shipments, provided export prices are high enough to offset the influence of the A$.