Australia’s beef in a competitive international market
Tim McRae
Chief Economist & Manager – Market Information and
Analysis, MLA
What are you going to hear…
1. Quickly go back in time to previous NTCA
presentations.
2. Have a look over the fence at what's happening in
the US and Brazil.
3. Some basic numbers for 2014 & beyond.
4. What does this all mean
3rd time around at NTCA…
2010:
- medium to long term demand for beef to improve as economies
and incomes recover and population growth continues…but
where will the beef come from?
- Asian demand tipped to be the driving force for growth.
2011:
“Overall, the fundamentals of the global beef market points to a
period of rejuvenated demand and higher prices. With seasonal
conditions set to boost production levels, the Australian beef
industry is very well placed to capitalise”.
But I’ve heard cattle prices in other countries….
• US up 24% for choice cattle, 19% for feeders and 20%
for cows
• Brazil steers up 20% year-on-year
• Uruguay steers up 26%
• NZ steers up 31%
• Export prices to Japan up 15% in AUD (fullsets)
• Export prices to US up 22% in AUD (90CL)
(all % changes are year-on-year)
…have Aussie cattle producers missed the boat?
The US market is short of beef…
Record US prices from “gate to plate”
US cattle prices
have surged to
record levels
550
A¢/kg FAS
2012-13
2013-14
US cattle herd at
lowest level in 60
years
monthly five-year ave
500
450
400
350
300
J
A
S
O
N
D
J
F
M
A
M
J
US 90CL imported
beef prices at alltime high
Brazilian market flat out meeting demand…
• Slaughter cattle prices exceeded R$4 for the first time
on record in March 2014 (177US¢/kg lwt)
• Robust domestic demand – 200m pop @ 40kg head
• Strong export growth – Russia, HK, Venezuela, Egypt
…all helped by a 30% decline in the Brazilian currency
since peaking in 2011.
USDA: “Exports are forecast nearly 8 percent higher at over
1.9 million tons, mostly driven by increased competiveness
from the depreciation of the Real”.
But the US and Brazil have some big advantages…
• Massive domestic markets
- US = 11 million tonnes cwt (316 million people)
- Brazil = 8 million tonne cwt (200 million people)
For the US producer:
• 90-95% of all beef produced is transacted with NO
currency or market access constraints
For Brazilian producers:
• 80-85% of all beef produced is transacted with NO
currency or market access constraints
For Aussie cattle, 2013 will not be seen again…
Cattle & beef:
• 1.1 million tonnes beef exported - 8.34m slaughter,
highest since 1978 & prices take a hit!
Live cattle:
• 851,000 head shipped
3 big “external factors”
• Severe drought spreads rapidly though QLD & NSW
• A$ drops to below 90US¢
• Live export situation improves significantly
Record slaughter = record % of production exported
• Record beef exports = 1.1m
tonnes
• Record 68.4% of production
• Record exports to “other
markets”
• No stockpile of beef!
…but…
• Japan remains tough
• Returns for chilled beef
constrained
• Strong competition
• Major access constraints
Traditional trade patterns have been shaken…
Aussie beef to China
“China, the world’s
biggest meat
consumer, may
double beef imports
by 2018 as
consumers can
afford to buy more
products they deem
to be safer and
healthier, according
to Rabobank
International”
(Dec 2013, SMH)
Future markets for Australian beef exports
• Beef exports as a % of production to sustain increasing
trend…China, US, Korea, Indonesia.
Japan turning away from chilled beef…
US is attracting more beef in 2014
Looks likely that Chinese demand will be sustained
Indonesia showing very strong demand for beef
Future markets for Australian live cattle exports
Indonesian recovery has been very welcome…
Will we have the cattle to meet boxed and live demand?
Will we have the cattle to meet boxed and live demand?
8.34 million head
The supply of cattle is about to get very tight…
• In the past 18 month total cattle turnoff (slaughter +
live) has been at its highest level since the mid
1970’s…but we did have a build up for 2 years prior.
• Add to this turnoff the increased deaths from
drought
• Plus what will be very low branding rates for 2012,
2013 and early 2014
The supply of cattle is about to get very tight…
Higher outflows with decreased inflows = significant
contraction in available supplies for 2014, 2015 and
possible into 2016.
“There could be up 2.5 million head less cattle
entering the cattle herd between January 2013 and
December 2014”
…but just when will the supply pendulum swing?
About bloody time it rained!
The falls this week has seen
a significant jump in the
market, matched by a
sharp contraction in
turnoff…but more needed,
especially in western QLD
and NSW.
Northern regions have
been much better, which
should go well for the year
ahead
So lets pull all this together…
1. The world is after more beef & global cattle prices
have been reflecting this…
2. Australian cattle producers “taste” of this rising
market has been non-existent…but for very clear
reasons – A$ & drought induced supply surge.
3. The supply pendulum will swing very quickly at
some stage in 2014…we have a major “marketready cattle” inventory shortage looming!
Thankyou