Increasing price forecast for Australian cattle, thanks to beef demand

By Georgi Gyton

- Last updated on GMT

It has been suggested prices could increase as much as 40%
It has been suggested prices could increase as much as 40%

Related tags Cattle Beef Livestock

Despite a looming shortage of cattle, robust global demand for beef has put a positive spin on Meat & Livestock Australia’s (MLA) 2014 mid-year cattle projections.

Tim McRae, manager for market information and analysis at MLA, said that by June 2015, the Australian cattle herd was forecast to have fallen to 26.1 million head – its lowest level for almost two decades – due to the impact of severe drought in the key cattle-producing regions of Queensland and New South Wales.

"In turn, national cattle slaughter has continued at rarely-seen levels for over 18 months, and will significantly reduce the amount of cattle available for processing or exporting in coming years,"​ said McRae.

"But with the inevitable tightening of supply, prices for Australian cattle are forecast to increase into next year, bringing them back in line with global cattle and beef prices."

However, he said a limiting factor in the price turnaround – which has been suggested could be as much as +40% – was the outcome of seasonal conditions throughout the remainder of the year. According to the MLA’s report, another question mark hovered over whether those businesses in the worst drought-hit regions would be able to capitalise on the increase in prices.

The MLA said demand for live exports was expected to stay strong, with shipments expected to reach 1.1m head for the year - their highest level since 2003, underpinned by demand from Indonesia and Vietnam.

Exports of beef and veal are also expected to reach similar levels, driven by surging female slaughter and production levels, it said, with interest from Asia helping to balance out some of the supply and price pressure in the southern markets. However, production is forecast to decline by 1.3% year-on-year to 2.3mt cwt, and the drought has led to lighter carcase weights.

"With the emergence of China, record prices for manufacturing beef in the US and improved market access agreements into Japan and Korea, the global competition for Australian beef is extremely strong heading into the second half of 2014,"​ added McRae.

"The US market is forecast to be Australia’s largest export beef market in 2014, surpassing Japan for the first time since 2003. The catalyst for this has come from both an increased available supply of Australian beef for export, and tight supplies in the US."

Andrew Ogilvie. president Cattle Council of Australia, told GlobalMeatNews​, said: "The 2014 cattle industry projections point to a more positive outlook for Australia cattle producers. However, many producers in the north sold their breeders at very low prices, and with prices tipped to increase they will now be seeking to restock at a higher price.

"While the report points to tightening of supply and therefore an increasing forecasted price for Australian cattle, it remains to be seen as to whether these price increases flow through to benefit producers on-farm.

"The limiting factor, as always in the Australian market, is good seasonal conditions for the remainder of 2014 and the 2014-15 wet season. These predictions are dependent on rainfall."

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