Issue Number: 11
Date: October 2015
Western Australian beef commentary
Newsletter of the Department of Agriculture and Food, Western Australia
Prepared by Kate Pritchett and Kimbal Curtis
Partners
Summary
 The size of the Western Australian cattle herd has increased 5% year on year between
2012/13 and 2013/14 from 1.88 million head to 1.97 million head. This is reflected in the
increase in the number of female cattle in the herd which has grown from around 1 million to
1.08 million head.
 During 2014/15 total turn off fell 6% when compared to 2013/14 from 720 thousand head to
680 thousand head however it is still higher than it has been since 2010/11.
 425 thousand cattle were slaughtered in Western Australia during 2014/15 which is an
increase of 3% compared to the previous year. Australia wide there was an increase of 7% to
10.1 million head
 A year on year decrease of 18% was reported for the number of cattle exported live from
Western Australia in 2014/15, falling from 305 thousand to 250 thousand head. Our largest
markets during 2014/15 were Indonesia and Israel.
 The proportion of beef exported from Western Australia has increased from 26% to 41%
during the last four years. The largest markets for boxed beef were that of Japan followed by
South Korea.
 During 2015 Western Australian cattle prices have remained very strong. All the major sale
yard indicators were in the 97th-99th percentiles during September.
 Prices for feeder yearlings and heavy cows have been higher throughout 2015 (January to
September) than they have been at any time during the preceding 3 years.
Contents
Current herd situation in Western Australia ..................................................................................... 2
Cattle turn-off and beef production................................................................................................... 2
Cattle slaughter ............................................................................................................................ 3
Beef production ............................................................................................................................ 4
Exports by volume ........................................................................................................................... 5
Beef exports ................................................................................................................................. 5
Live exports .................................................................................................................................. 6
Exports by value .............................................................................................................................. 7
Beef and veal exports ................................................................................................................... 7
Live exports .................................................................................................................................. 8
Market indicators.............................................................................................................................. 9
Insights and opportunities .............................................................................................................. 11
Retail Prices ............................................................................................................................... 11
Indonesian Quotas ..................................................................................................................... 11
US Quotas .................................................................................................................................. 12
French bluetongue virus outbreak .............................................................................................. 13
Appendix ........................................................................................................................................ 14
If you would like to receive future issues of WA Beef Commentary, please email
kate.pritchett@agric.wa.gov.au with subject “Subscribe WA Beef Commentary”
Important disclaimer
The Chief Executive Officer of the Department of Agriculture and Food and the State of Western Australia
accept no liability whatsoever by reason of negligence or otherwise arising from the use or release of this
information or any part of it.
Copyright © Western Australian Agricultural Authority, 2014
1
Current herd situation in Western Australia
As seen in Figure 1 below, the Western Australian beef cattle herd increased 5% year on year
compared to 2013/14 from 1.88 million head to 1.97 million head. Contributing to this reported
increase is a reduction in the volume of cattle exported live and the withholding of female cattle
from slaughter. This is the largest the herd has been since 2009/10 and may be indicative of
growing confidence surrounding the industry as a result of strong prices.
Total turn-off WA
WA herd size
Cows and heifers 1 year and over
Cattle number (millions)
2.5
2
1.97
1.5
1.08
1
0.72
0.68
0.5
0
Figure 1 Closing number of beef cattle and number of cows and heifers in the Western Australian
herd and total turn-off (slaughter plus live export) by year. (Based on data from Australian Bureau
of Statistics (ABS), analysed by the Department of Agriculture and Food, WA (DAFWA))
The diagram in the appendix of this document describes the avenues the producers used when
disposing of cattle during the 2014/15 financial year. Domestic slaughter accounted for 62% of
turn-off whilst 37% were exported live. A further 1% were moved interstate. Domestic consumption
accounted for 59% of the beef produced, a significant decrease compared to 66% the year before.
The remaining beef was exported to 30 destinations.
Cattle turn-off and beef production
There are two avenues available to producers in Western Australia in which to turn off cattle; that
of live export or domestic slaughter. As seen in Figure 2, domestic slaughter is utilised more often
than live export and is less volatile in nature, however in some parts of the state, particularly
northern WA, live export is the more viable option. During 2014/15, a total of 425 thousand head
were slaughtered in WA continuing the increasing trend observed since 2011/12. Live export on
the other hand reached 250 thousand head during 2014/15 which was a decrease of 18% year on
year.
2
Thousands
Slaughter
Live export
600
500
400
300
200
100
0
Figure 2 WA cattle turn off (Based on data from ABS, analysed by DAFWA)
Cattle slaughter
Western Australian cattle slaughter has been steadily increasing since 2011/12 reaching
425 thousand head in 2014/15 as seen in Figure 3. This represents a 3% increase year on year
when compared to 2013/14.
A similar story is evident when analysing the slaughter data for the whole of Australia with even
larger year on year increases. There has been an increase of 7% year on year from 9.5 million
head to 10.1 million head for Australia as a whole. This is partly due to the continued sell down in
the Eastern states, predominantly Queensland and New South Wales, due to ongoing drought
conditions, strong prices and high demand from international markets.
WA
12000
600
10000
500
8000
400
6000
300
4000
200
2000
100
0
WA cattle slaughter (thousands)
Australian cattle slaughter (thousands)
Aust
0
Figure 3 Annual cattle slaughter for Australia (LHS) and Western Australia (RHS) (Based on data
from ABS, analysed by DAFWA)
3
Historically a larger number of cows and heifers have been slaughtered in comparison to bulls,
bullocks and steers in Western Australia however there has been a change in this trend over
recent years. Since 2009/10 the number of female and male cattle slaughtered has converged as
seen in Figure 4. Of the 414 thousand WA cattle slaughtered in 2014/15, there were equal
numbers of males and females. This may be a sign of herd rebuilding as more females are
retained for breeding purposes.
Bulls, bullocks, steers
Cows, heifers
number slaughtered (thousands)
350
300
250
200
150
100
50
0
Figure 4 Western Australian slaughter by animal type (Based on data from ABS, analysed by
DAFWA)
Beef production
The majority of beef produced in WA is consumed in the domestic market as opposed to being
exported to overseas markets. Despite this the proportion of beef exported has increased
markedly over the last two years from 26% in 2011/12 to 41% during 2014/15 (Figure 5). This left
59% of WA beef to be consumed by the domestic market. The reduction in domestic consumption
may be due to consumers tightening their belts due to generally poorer economic conditions in
WA, along with the increased cost associated with buying beef. There have been reports of protein
substitution occurring; as beef becomes more expensive the consumer buys cheaper alternatives
such as chicken or pork in place of beef.
4
140
120
million kg CEW
100
80
Export
60
Domestic
40
20
0
Figure 5 Beef consumption by market (Based on data from ABS, analysed by DAFWA)
Exports by volume
Beef exports
Of the beef exported to overseas markets Japan is the largest market in volume terms. Over the
last three years they have increased the volume of Western Australian beef they import
substantially from 5 million kg (CEQ) in 2011/12 to 10.4 million kg (CEQ) in 2014/15 – an increase
of 108%.
Quantity of beef exported (carcase equivalent
qty in million kg)
The USA which was our 4th largest market during 2014/15 also had a large increase in beef
exports during 2014/15 compared to recent years. During 2014/15 there was an increase of 769%
year on year from 651 thousand kg (CEQ) to 5.66 million kg (CEQ) (Figure 6).
18
16
14
12
Japan
10
South Korea
Indonesia
8
USA
6
China
4
Other (n=25)
2
0
Figure 6 Quantity of Western Australian beef exported by destination (Based on data from ABS,
analysed by DAFWA)
5
Live exports
Thousands
As illustrated in Figure 7 the live cattle export trade is quite volatile from year to year. Whereas a
low point was experienced during 2011/12 and 2012/13 following the suspension of trade to
Indonesia and the subsequent implementation of the ESCAS protocol, 2013/14 was incredibly
strong with an increase of 56% year on year. Unfortunately during 2014/15 there has been an 18%
decrease in the number exported from 305 thousand head to 250 thousand head. During this
period Queensland and Northern Territory exporters absorbed a larger share of the available
trade.
400
350
300
250
200
150
100
50
0
Figure 7 Total number of cattle exported live from Western Australia (Based on data from ABS,
analysed by DAFWA)
As seen below in Figure 8 Western Australia’s largest market for live export cattle is Indonesia.
Despite a significant decrease in the number of cattle exported to Indonesia between 2013/14 and
2014/15, they remain Western Australia’s largest live cattle market. They are closely followed by
Israel and new comer to the market Viet Nam.
6
Number of cattle (thousand head)
300
250
200
Indonesia
Israel
150
Viet Nam
Malaysia
100
Egypt
Other (n=7)
50
0
Figure 8 Number of Western Australian cattle exported live by destination (Based on data from
ABS, analysed by DAFWA)
Exports by value
Beef exports
As stated previously Japan is Western Australia’s largest market by volume, and it is also the
largest market by value, taking $31.4 million of Western Australian beef in 2014/15. This was
followed by South Korea then the USA. Whereas the USA was the fourth largest export
destination for Western Australian beef in volume terms it is the third largest destination in value
terms meaning it takes higher value cuts than other markets. It had a meteoric year on year
increase in export value of 1095% (Figure 9).
beef export value (A$million FOB)
60
50
40
Japan
South Korea
30
USA
Indonesia
20
China
Other (n=25)
10
0
Figure 9 Value (A$ million, FOB) of beef exports by year and destination (Based on data from
ABS, analysed by DAFWA).
7
Live exports
As expected the value of live exports, in a similar fashion to the volume, has been quite volatile
over the last 10 years. Whereas there has been a year on year decrease of 10% in 2014/15 to
$213 million, this followed an 80% increase during 2013/14. It is also well above the 10 year
average of $189.5 million represented by the orange (horizontal) line in Figure 10.
250
A$ million, FOB
200
150
100
50
0
Figure 10 Total value (A$ million, FOB) of live cattle exports from Western Australia (Based on
data from ABS, analysed by DAFWA)
During 2014/15 Western Australia exported live cattle to over 10 destinations. The most lucrative
destination for live cattle in both volume and value terms was Indonesia as seen below in Figure
11. The second largest destination in value terms was Israel followed by Viet Nam. Viet Nam has
only been active in this market for the past three years and has been increasing substantially each
year. During 2014/15 the value of live cattle exported to Viet Nam increased by 312% year-onyear.
8
180
160
A$ million, FOB
140
120
Indonesia
100
Israel
Viet Nam
80
Malaysia
60
Egypt
40
Other (n=7)
20
0
Figure 11 Value (A$ million, FOB) of cattle exported live from Western Australia by destination
(Based on data from ABS, analysed by DAFWA).
Market indicators
Western Australian cattle prices have been relatively strong so far during 2015. This may be in
part due to increasing international demand outstripping supply, but also aligns with the strong
prices reported in eastern Australia. As illustrated in Table 1 below the major West Australian
cattle indicators have been above the 95th percentile during September 2015, other than feeder
vealers which didn’t report any sales during September.
Table 1 The September 2015 average and percentile, plus the first and third quartile values for the
main cattle industry indicators for WA (Based on data from National Livestock Reporting Service
(NLRS), analysed by DAFWA)
Feeder vealers
Feeder yearling
Heavy yearling
Pastoral cows
Heavy cows
Light bulls
September
1st
3rd
2015
Percentile
quartile
quartile
average
N/A
N/A
159
206
299
99
150
203
291
99
146
203
191
99
85
130
214
97
107
149
248
97
136
173
Prices for feeder yearling cattle in WA have been stronger in 2015 than any of the past three
years. This has been the case for each month to date in 2015 as seen in Figure 12. In January of
2015 the feeder yearling price was 224 cents/kg which then rose to 298 cents/kg in June before
backing off slightly in July, but powered ahead to 299 cent/kg in September. This is 87 cents kg
higher than at the same time during 2014.
9
350
300
cents/kg
250
2012
200
2013
150
2014
2015
100
50
0
Jan
Feb
Mar
Apr May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Figure 12 Trend in Western Australian feeder yearling saleyard indicator (cents/kg liveweight)
(Based on data from MLA/NLRS, analysed by DAFWA)
The sale yard indicator for heavy cows in Western Australia during 2015 has also been very
strong, remaining higher than it has been over the last three years (Figure 13). In January of 2015
the price for heavy cows was 213 cents/kg rising to 232 cents/kg in February. It then fell to
201 cents/kg in June before climbing to 214 cents/kg in September 2015. Whilst the September
price is lower than earlier in the year it is still 36 cents higher than at the same time during 2014.
250
cents/kg
200
150
2012
2013
2014
100
2015
50
0
Jan
Feb
Mar
Apr May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Figure 13 Trend in the Western Australian heavy cow sale yard indicator (cents/kg liveweight)
(Based on data from MLA/NLRS, analysed by DAFWA)
10
Insights and opportunities
Retail Prices
Between March 2000 and September 2014 there has been a relatively strong increase in retail
prices for the majority of meats within Australia (Figure 14). Beef has historically received the
highest retail price closely followed by bacon and ham.
Between March 2000 and September 2014 the price of beef rose 56% from $10.47/kg to
$16.33/kg. Whereas this is good news for producers and retailers it is less rosy for consumers. If
prices continue to rise, it may lead to protein substitution where consumers decide to purchase
other less expensive meats such as chicken rather than buying beef.
1800
Retail meat prices (c/kg)
1600
1400
1200
Beef
1000
Lamb
800
Pork
Chicken
600
Mutton
400
Bacon & Ham
200
0
Figure 14 Australian retail meat prices (c/kg) by meat type (Based on data from MLA, analysed by
DAFWA)
Indonesian Quotas
As seen in Figure 8 the largest live export market for Western Australian cattle is that of Indonesia.
This market has been relatively volatile in recent years following the suspension of the live trade
by the Federal government in 2011, the following implementation of ESCAS and the restrictions
brought on by the size and timing of quotas issued by Indonesia.
Currently the live cattle trade with Indonesia is controlled by quarterly quotas issued to importers.
During the second quarter of 2015 (April to June) a total quota of 250 000 cattle was issued to
importers.
The live cattle trade was surprised and dismayed when the Indonesian government slashed the 3rd
quarter (July to September) cattle quota to 50 000 cattle in order to increase Indonesia’s selfsufficiency and food security.
This took both Indonesian importers and Australian cattle producers by surprise as they were
expecting approximately 200 000 cattle permits.
The reduction in cattle permits subsequently led to an expectation of reduced beef supplies in
Indonesia and hence a sharp spike in retail beef prices. In order to combat rising prices the
11
government issued permits for a further 50 000 slaughter ready cattle (as opposed to feeder
cattle) however there are reports these were not successfully filled (Farm Weekly).
At the beginning of the 4th quarter (October to December) the Indonesian government made a
welcome announcement of an allocation of 200 000 cattle permits for the final quarter (Farm
Weekly).
However due to the slow release of 4th quarter permits shipping capacity is tight as it has already
been contracted to other markets and Indonesian feedlots are short of cattle. This may further
drive prices higher in Indonesia.
Currently Australia is the only supplier of live cattle to Indonesia. The Indonesian government is
reported to be seeking to reduce its dependency on Australian cattle. In order to do this, media
reports indicate they are aiming to open up the market to India and the Philippines (despite their
FMD status) and possibly New Zealand. This may help resolve their price hikes and the beef
shortages going into next year (Farm Weekly).
In 2016 Ramadan in Indonesia commences in early June, meaning they need to fill beef stocks
during the 4th quarter in 2015 and the 1st quarter 2016. This may prove difficult leaving them short
during the important Ramadan period (Farm Weekly).
A large quota during this time of year also poses challenges to the Australian industry. Live cattle
to Indonesia are predominantly sourced from Northern Australia. The 4 th quarter (October to
December) occurs during the end of the dry season where feed availability may be limited and
cattle are generally lighter leading to less cattle being available that are ready for sale. This is then
followed by the wet season during the 1st quarter when mustering all but ceases making sourcing
adequate numbers of cattle difficult.
Recently Federal Trade and Investment Minister Andrew Robb visited his counterpart in Indonesia
to discuss an annual quota system. This would improve trade stability and allow better forward
planning at all sections of the supply chain (Farm Weekly).
US Quotas
The USA is one of Australia’s largest beef markets and had grown remarkably in recent years. It
was Australia’s largest market in both value and volume terms during 2014/15 though Western
Australia’s 3rd largest market by value and 4th by volume.
Under the 1995 Uruguay Round Agreement on Agriculture and the 2005 USA- Australia Free
Trade agreement, Australia can export beef tariff free to the USA as long as it remains below a
certain quota. During 2015 that quota is 418 214 tonnes (Department of Agriculture and Water
Resources).
As of July 2015 Australia had already exported 267 555 tonnes (shipped weight) to the USA (ABS
exports) which is 64% of the quota.
When Australia reaches 85% of the quota, which is 355 482 tonnes, prior to October an allocation
system is triggered so as to manage exports. Under this system the remaining 15% is allocated
according to exporter’s prior records of shipments. This quota is tradeable so exporters without
any quota can buy some off those that have quota available (The Land).
Once the quota is reached Australian beef exported to the USA will be subject to a 21.12% tariff
for the remainder of 2015 (ABC).
Quota usage exceeded 85% on the 31st August 2015 (Department of Agriculture and Water
Resources).
12
French bluetongue virus outbreak
There has been another outbreak of the Bluetongue virus in France this year. It has been
discovered on a farm in central France at Les Brulards. Authorities have imposed a 150 km
protection zone which contains 4.6 million cattle, 700 000 sheep and 160 000 goats.
Figure 15 Area of latest Bluetongue infection in France (Source: The Cattle Site)
The virus can be spread by the movement of infected stock or through the movement of
Culicoides midges also known as aerial plankton.
So far it is thought that there are inadequate supplies of vaccine for the disease raising concerns
that the disease could spread throughout Europe.
The French strain is generally thought to be serotype 8 which is a very aggressive strain. It caused
large losses especially to the sheep industry in 2006 to 2008. Approximately 25% of sheep and
1% of cattle were killed by the strain between 2006 and 2008. Whilst fatalities in cattle are much
lower the impacts are still disastrous with movement restrictions, loss of trade, reduced milk yield,
decreased reproductive performance, still born calves and costs associated with disease control
and surveillance.
Another serotype (four) of the virus has also been found in Hungary and Romania earlier in
September (The Cattle Site).
13
Appendix
Western Australia
59%
Year: 2014-15
Domestic consumption
64,000
Domestic
slaughter
108,000
23%
18%
10,000
$31M
Japan
41%
44,000
$169M
Slaughter
62%
425,000
Cattle
Disposals
by WA
Producers
0.9%
Interstate
transfers
6,100
681,000
Live Exports
37%
46%
44%
114,000
$93M
Live exports
(northern ports)
18%
17%
7,800
$28M
13%
12%
5,700
$20M
13%
16%
5,700
$27M
33%
38%
15,000
$64M
59%
58%
67,000
$54M
21%
24%
24,000
$22M
250,000
20%
18%
$213M
22,000
$17M
54%
56%
136,000
$120M
Live exports
(southern ports)
Source: Based on ABS data, DAFWA analysis
Values in blue are number of head, values in red are tonnes (carcase equiv.), values in green are $A million (FOB)
Totals and sums of component items may differ due to rounding.
14
44%
45%
60,000
$54M
14%
16%
19,000
$19M
13%
10%
17,000
$12M
11%
10%
15,000
$13M
17%
19%
24,000
$22M
Korea
Indonesia
United States of America
Other markets (n=26)
Indonesia
Malaysia
Viet Nam
Israel
Viet Nam
Egypt
Indonesia
Other markets (n=8)