Australian beef exports to Japan fell by nearly 10 per cent in 2007-08, reflecting lower availability of grain fed beef in Australia, the appreciation of the Australian dollar against the yen and some increase in competition from the United States. Exports to Japan are forecast to fall by a further 4 per cent in 2008-09 to around 350 000 tonnes, as a result of expected lower demand for Australian beef as competition from the United States continues to increase.

To date there have been no changes to Japanese import protocols for US beef, with imports still restricted to beef from age-verified cattle less than 21 months. This protocol continues to constrain US exports to Japan, with export volumes in 2007-08 less than 8 per cent of the volume in 2002-03 (before the discovery of BSE, bovine spongiform encephalopathy or ‘mad cow disease’, in the United States). It remains uncertain as to if and when the age restriction on US beef imports will be relaxed.

In an attempt to increase US beef exports to Japan (from the small proportion of US cattle which are slaughtered under 21 months of age and which can be age-verified), the US Meat Export Federation (USMEF) has devised a research program to develop 17 new beef cuts to appeal to Japanese consumers. This program is now in full operation, with USMEF conducting training and educational sessions with retailers, distributors and consumers in Japan.

While US beef exports to Japan remain well below 2002-03 volumes, exports have been increasing in recent months. This could be partly because of the beef cuts program, as well as an increase in the number of age-verified cattle under 21 months being slaughtered.
Even with the uncertainty surrounding any easing of the import restrictions, Japanese imports of US beef are expected to rise in 2008-09, leading to a fall in the demand for Australian beef in Japan. If the 21 month age restriction on US beef is relaxed, the decline in Australian beef exports could be greater than currently forecast.

Australian beef exports to the United States are forecast to remain relatively low in 2008-09 at around 245 000 tonnes, only 2 per cent more than exports in 2007-08. This follows a 21 per cent decline in exports to the United States in 2007-08, which was largely because of the appreciation of the Australian dollar against the US dollar and subdued demand in the United States for imported beef.

Female cattle slaughter in the United States remained high throughout 2007-08. This suggests a continuation of the liquidation phase of the US cattle cycle as a result of at least two years of dry conditions and high grain prices. In its August outlook, the United States Department of Agriculture stated that cattle prices, despite being historically high, were below the costs of production for most cattle sectors.

The demand for imported manufacturing beef in the United States is expected to increase in 2008-09, assuming that US cow slaughter declines as grain prices fall. However, Australian export volumes to the United States are expected to be constrained by declining female cattle slaughter in Australia as producers begin to rebuild herds.

Since being declared free of foot and mouth disease in May 2003, Uruguay has been one of Australia’s major competitors in the US manufacturing beef market. In 2004-05, the import share of Uruguayan beef peaked at 15 per cent of total US beef imports. Since then, US imports of Uruguayan beef have been declining. In 2007-08, imports fell by 50 per cent, as the price of Uruguayan beef increased. The majority of Uruguayan beef was shipped to alternative markets such as the European Union and the Russian Federation.

Uruguayan beef prices are likely to remain high in 2008-09. With decreasing competition from South American beef in the US market, it is expected that demand for Australian manufacturing beef will increase in 2008-09. As a result of these factors, the landed price of Australian beef in the United States is forecast to rise in 2008-09. The price of 90CL (90 per cent chemically lean) cow beef is forecast to rise by 19 per cent to 360 US cents a kilogram. This follows a 7 per cent increase in prices in 2007-08.

Live cattle exports increased by 12 per cent in 2007-08, largely reflecting strong demand in Indonesia and an increased supply of suitable cattle from Australia. Live exports are forecast to fall by 2 per cent to around 700 000 in 2008-09, but to still remain relatively high. This forecast decline reflects higher cattle prices and lower availability of cattle suitable for live export. Demand from Indonesia, however, is expected to remain strong.