Strong international demand driving Australian beef industry

Strong international demand is one of the many factors driving the Australian beef industry, according to Rabobank.

It says that the future of the beef industry there is bright and that a constrained global supply, a depreciating dollar and trade agreements are also driving factors.

An improvement in the weather and drought-breaking rains through many cattle-producing regions would provide that necessary relief for many producers and allow the herd rebuilding process to begin, Rabobank says.

With a generally optimistic sentiment flowing through the industry, it says that common topics of discussion are focused on domestic production, export markets, the live cattle trade and the future for cattle prices.

Rabobank says that the Australian beef industry has long been exposed to the supply-and-demand fluctuations experienced by global drivers and local seasonal conditions.

Production

According to Rabobank, Australian beef production cannot continue at current levels.

With the cattle inventory estimated to drop to 26m head, a sustainable slaughter rate is expected to be found between 7-7.5m head per year, which is a decrease of around 2m head on 2014 levels, it says.

An increase in slaughter rates will partially offset the reduction in slaughter numbers, Rabobank says, however, production is expected to drop to between 2-2.17m tonnes.

While record slaughter numbers have allowed Australia to tap into growing export markets, production given the herd size is not sustainable, it says.

Exports Markets

Despite the level of exports to the US being historically high, they are not unique and as US beef production recovers and trade environments change, the level of exports to the US is expected to decline, according to Rabobank.

However, it also says that opportunities exist for Australian beef to leverage characteristics and support developing niches of the US beef consumer market.

Furthermore, with improved access under an FTA, coupled with strong credibility to meet the needs of the food safety-concious Chinese consumer, China has the potential to become one of Australia’s top two beef trading partners, it says.

Cattle Prices

Australian cattle prices started strongly in 2015, they have increased as the year has gone on and they are expected to remain strong into 2016, according to Rabobank.

Prices were expected to react to a shortening in supply however this reduction in supply was not seen due to slaughter rates being 3.8% higher than the same time in 2014, it says.

Rabobank says that with a strong US market, prices have been driven by global demand.

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