Tough 2009-10 For Aussie Beef Exports

AUSTRALIA - Australian beef and veal exports for the past fiscal year (July 2009 - June 2010) contracted seven per cent, due to lower beef production, the high A$, increased US competition and sluggish export demand - as major markets slowly recovered from deep recessions.

8 July 2010

4 minute read

Oceania

Exports for the year totalled 898,960 tonnes swt, with falls to Australia's two largest markets, Japan and the US (Department of Agriculture, Fisheries and Forestry - DAFF).

One of the main overriding factors for the past 12 months for Australian beef exports was the slow and tentative recovery of the global economy after the deep recession. As the fallout from the recession extended globally, it was the impact on US and Japanese consumer demand for beef which hit Australian exporters, accentuated by a much higher A$.

The A$ in 2009-10 averaged 18 per cent higher than the previous year, at 88.2US¢, which added to the cost of Australian beef at a time when buyers in exports markets, especially Japan, were looking to keep prices lower to maintain consumer demand. Against the Japanese yen, the A$ averaged nine per cent higher, at 80.6¥, while it jumped 17 per cent against the euro, 10 per cent on the Korean won and seven per cent against the Indonesian rupiah.

Demonstrating the impact of the higher A$ on export beef returns, indicative Australian 90CL manufacturing beef returns from the US market averaged six per cent higher in US¢/lb terms in 2009-10, but when converted to A$, they averaged 11 per cent lower. However, while averaging lower for the year, prices in the US did improve throughout the year, peaking in April, as market signals pointed to recovering demand in 2010 and low beef inventories.

Japan maintained its position as Australia's largest market in 2009-10, despite exports contracting four per cent, to 349,888 tonnes swt. Combined with tighter available beef supplies, Australian beef to Japan faced increased competition from US imports (tracking 47 per cent higher as at the end of May).

The fall for the year was primarily due to lower grassfed beef shipments, which were down year-on-year for eight consecutive months between July 2009 and February 2010, as suitable supplies of heavy finished steers remained tight. Total grassfed Australian beef exports to Japan for 2009-10 were back six per cent, at 198,691 tonnes swt, while grainfed shipments were up slightly, at 151,197 tonnes swt - assisted by increased numbers of cattle on feed.

Australia's beef and veal exports to the US for the past fiscal year dropped 25 per cent to 210,514 tonnes swt - the lowest fiscal year volume since 1996-97. This was due to tight manufacturing beef supplies, the high A$, more attractive prices elsewhere, high US cow beef supplies and sluggish US consumer demand, with recessionary conditions and very competitive prices for chicken and pigmeat.

One of the brightest markets for Australian beef in 2009-10 was Korea, with exports up 10 per cent year-on-year, to 123,837 tonnes swt. Australian shipments had been expected to contract under increased pressure from US imports. However, robust Korean demand and a decline in domestic beef production lifted demand for Australian beef, especially chilled product.

Demonstrating the rapidly growing importance of the South East Asian region for Australian beef exports, shipments in 2009-10 were a record 131,302 tonnes swt - up 20 per cent on the previous year and 85 per cent above the average for the past five years. The most notable growth was to Indonesia, where exports surged 31 per cent year-on-year, to a record 49,769 tonnes swt.

Record volumes for the period were also registered to China (up six per cent, to 4,323 tonnes swt) and Hong Kong (up 56 per cent, to 8,185 tonnes swt), while exports to Taiwan reached their highest level in seven years, at 31,758 tonnes swt.

Despite a resurgence since March, Australian beef and veal exports to Russia for 2009-10 slipped 36 per cent year-on-year, to 23,769 tonnes swt, reflecting weak demand and tighter supplies throughout late 2009 and early 2010.

The Middle East continued to expand for Australian beef in 2009-10, with beef demand boosted by rising demand and tight supplies for other protein products. Exports for the year surged 40 per cent, to a record 19,397 tonnes swt - with Dubai and Saudi Arabia the largest single markets.

For 2010-11, Australian beef exports are expected to benefit from slowly recovering demand, based upon the assumption of further improvement in economic conditions in the US and Japan. The A$ is likely to remain a major constraint again for exporters, while available beef supplies should improve into 2011.