DROUGHT in the US is set to be great news for Australian beefexports and local cattle prices by next year, despite uncertain economic times hindering global demand in the near future.
Despite short term obstacles like the high Australian dollar, a bulge in US drought-induced herd slaughter rates and global economic insecurity, beef’s longer-term market prospects were literally “bullish”, said Rabobank animal protein market specialist, Wendy Voss.
The bank’s latest Beef Quarterly report, co-authored by Ms Voss, has forecast a notable upturn in demand for the second half of 2012. Cattle prices within Australia are tipped to hit record highs later next year as overseas markets shift from a summer supply bulge - primarily caused by the US where herds are being culled due to severe drought - to materially lower supplies.
Rabobank estimated the hardest hit states of Texas, Oklahoma and New Mexico, now experiencing their worst season on record, were home to about 25 per cent of the US beef herd. Although US cattle numbers are already low, America is a key competitor in beef export markets, particularly when forced to offload extra beef tonnages. The big US dry follows similar extreme conditions five years ago when 84pc of ranchers culled numbers considerably. Beefexport competition to Australian sales was expected to remain low until at least 2014, declining rapidly after an initial slaughter peak early next year, Ms Voss said. “Declining US beef production is likely to be a support for higher farm gate prices,” she said. But Australian live export values were already rising strongly because of restrictions on live export numbers to Indonesia, where the market for Australian cattle is still hungry. After the Federal Government’s ban on live exports to Indonesia was partially lifted in August prices rose sharply, hitting record highs for September, Ms Voss said. Given northern Australia was fast approaching its wet season, which would also restrict export supplies, live exportcattle values were likely to stay high until year’s end and may even exceed previous records. She said the longer-term view was for global meat protein supplies to continue to lag behind income and population growth in important emerging markets. “This places pressure on supply, increasing prices throughout the supply chain, from feeder cattle buyers, processors and all the way through to consumers,” Ms Voss said. However, demand would be curtailed in the short term by the strong Australian dollar and the uncertain global economy’s impact on consumer confidence in some key Australian beefmarkets.
