Beef demand staging a comeback: M.L.A.

by Bryan Salvage
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NORTH SYDNEY, AUSTRALIA — Early signals indicate beef demand is staging a comeback and the Australian beef industry has likely weathered the worst of the turbulent trading conditions created by the global economic and financial crises, according to Meat & Livestock Australia’s 2009 Cattle Industry Projections — Mid-Year Update, released Aug. 10.

Several factors could hinder the recovery: the direction of the Australian dollar, whether the southern drought recedes and the timing of a turnaround in global economies.

Domestic and global beef demand was more severely impacted by the global economic and credit crises during the first half of 2009 than was previously anticipated. However, there is a growing consensus global economies will stage a recovery later this year, stopping the slide in consumer demand for beef.

"World economic bodies are forecasting improved economic conditions for later this year, beef stocks in key markets are dwindling, lower import prices are starting to be passed through to consumers in Japan and the Korean market is recovering from the period of instability created by the return of U.S. product," said M.L.A. economist Tim McRae. "M.L.A. predicts export demand will start to rally in the second half of 2009, further aided by a seasonal increase in demand from Japan and Korea."

Exporters are still grappling with tight livestock supplies, the appreciating Australian dollar, weak co-product prices and low import prices, he added. "It likely won’t be until 2010 that exports will start to really gather steam, when volumes are forecast to approach the 1 million tonne swt mark, as the Japanese, Korean and U.S. economies revert to growth," he said.

Later this year, improved demand will likely coincide with tight beef supplies on the back of improved seasonal conditions and herd rebuilding activity — an imbalance that could cause cattle prices to rise, depending on the direction of the A dollar and spring rains.

The volatility in cattle prices witnessed last year, which saw prices peak in October and then fall 10%-18% over the remaining months of the year, is unlikely to happen again this year, Mr. McRae said.

Beef and veal production in 2009 is predicted to decrease 2.5% compared to 2008, in contrast to the small rise forecast in M.L.A.’s projections in January — a result of lower-than-expected feedlot output; lower offer prices; lighter average carcass weights; and improved seasonal conditions — in the north and more recently in the south — encouraging producers to rebuild herds.

The Australian cattle herd is forecast to expand to 28.4 million head by June 2010, up 2.3% from 2009 and building towards 30 million by 2013. The full impact of herd rebuilding on turnoff, season permitting, is not expected until at least 2011, with beef production in 2010 rebounding from this year’s lower level but only back to levels seen in 2006 and 2007.

Tighter production and an increased portion of beef heading for export markets is expected to see Australian beef consumption fall 5% in 2009.

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