Global Focus report on Australian beef

by Editor
Wednesday, October 21, 2009

Population and income growth will result in increased demand for beef and other meat products as the world emerges from the global financial crisis, says a Rabobank Global Focus report on Australian beef. The report focuses on global beef market trends in Australian, Japan and the United States.

We were likely to see growth taking place in an environment of rising demand, not just for meat products but for a range of commodities, including dairy, sugar and grains, said Rabobank analyst Wendy Voss.

With limited agricultural land available, the recovery in demand will possibly see a renewal of the ‘battle for acres’ which was seen in the agricultural sector worldwide in the lead up to the crisis.

So with increased demand and limited land available, it was expected that cattle producers both in Australia and overseas will need to see farm gate prices rise in order to expand supply to match the expected growth in demand for beef, said Voss.

Rainfall and the Australian dollar remained the ‘X factor’ in the short term, even with a recovery in global beef demand, a return to drought or a continuance in the high Australian dollar would delay the improvement in prices and margins for Australian producers, said the analyst.

In Japan, Australia’s largest beef export market, unemployment reached record highs. The expected strong seasonal rise in beef demand in Japan in the second half of the year has failed to materialise, said Voss.

The Rabobank report says that while falling demand has affected the U.S. cattle industry, the grain price shocks experienced since 2006 have had an equal or even greater impact.

The U.S. cattle industry had been particularly vulnerable to the volatile grain market. Cattle from U.S. feedlotters had faced their third consecutive year of average losses on the back of surging grains and other input costs. After a decade of positive returns, the average margins for cow-calf producers also had fell into negative territory last year, said Voss.