Weak Australian dollar helps meat industry
Throughout the year, the currency has weakened, with one Australian dollar worth US$0.82 at the beginning of the year, and worth US$0.73 as of 27 October, boosting the competitiveness of Australian meat traded in US dollars.
“The declining Australian dollar occurred over the same period as a correction in the US cattle market and, as a result, meant that Australian cattle prices were cushioned from the US impact,” explained an MLA spokesperson. “This is important, as there is a long-standing correlation between US and Australian cattle prices. For the Australian cattle market to have continued finding new highs, while the US was falling rapidly, highlights the influence of currency on the cattle market.”
While the US is the largest importer of Australian grass-fed beef, it is also a competitor in markets like Japan and South Korea. Influenced by the weaker Australian dollar relative to the US dollar, Australia’s imported beef market share in Korea and Japan improved in 2014-15, at 56.3% and 56.6%, respectively.
Looking forward, according to Business Monitor International (BMI), due to wide current account deficit, the Australian dollar will remain under pressure during 2016, where it is forecast to average US$0.63. This will further assist the Australian livestock markets.
The Australian dollar has also declined against other major importer currencies in 2015, including the Japanese yen (down 10%), Korean won (down 8%) and Chinese renminbi (down 9%).
“Of course, the Australian dollar is one of a myriad of factors that influence livestock prices, among seasonal variability, tariffs, quotas, competing country production levels and competing protein levels. However, with the Australian dollar forecast to continue weakening, it will be of assistance,” the MLA spokesperson added.