Economic Climate puts Beef Demand Under Pressure

AUSTRALIA - Meat & Livestock Australia’s 2012 mid-year cattle projections update outlines the conditions that have kept Australia’s cattle supplies tight, while tough economic conditions in key export markets continue to put pressure on demand.

19 July 2012

2 minute read

Oceania

MLA Chief Economist Tim McRae said reduced cow slaughter and solid cattle prices have underpinned herd rebuilding activities in recent years, with demand the main challenge currently facing the Australian industry.

“While exports of beef and veal in 2012 are forecast to increase 1% to 960,000 tonnes swt, returns have been subdued in many markets, accentuated by the high A$ and problems in major world economies.”

Mr McRae said the outlook for demand still centres on the economic conditions in our established markets, which have been strained in recent years.

“Exports to Japan remain flat and exports to Korea are down 13% for the first half of 2012, as additional local and US product entered the market, at the same time as consumer demand declined.”

“The US market for Australian beef has rebounded in 2012, with exports up 46% for the first half of 2012, to 118,120 tonnes swt, with total shipments for the year forecast to reach 250,000 tonnes swt. The majority of the growth has been in manufacturing beef, with the higher prices in the US attracting shipments away from other markets such as Russia and Japan.”

Mr McRae said economic problems in our developed markets currently outweigh the benefits to be had from increased demand from emerging markets and the tight global supply of beef.

“Increasing demand from the growing middle class in developing economies across the globe remains a positive for Australian beef. This is currently being offset, however, by continued tough economic conditions and weak consumer sentiment in our developed markets – Japan and Korea.”

“Beef is currently at a price point in many markets that makes it difficult to compete with cheaper proteins, at a time when consumers are price conscious.”

Exports to Russia for 2012 have been revised back to 55,000 tonnes swt, along with lower expectations for volumes to Indonesia. However sustained demand from Taiwan and the Middle East, along with an improvement in access for Australian grainfed beef to the EU will assist shipments in the second half of 2012 and into 2013.

Symptomatic of the slower economic activity, especially at retail, the amount of beef destined for the Australian market for 2012 is unchanged on previous forecast, at 740,000 tonnes cwt - up slightly on 2011 due largely to increased production.

The forecast for live cattle exports remains unchanged at 570,000 head, 16 per cent lower than 2011, with 283,000 head or 55 per cent shipped to Indonesia.