beef and veal
frank drum : fdrum@abare.gov.au

In Australia, low pasture availability and high feed prices in 2006-07 are expected to result in increased cattle slaughter and higher beef production. As a result, the weighted average saleyard indicator price for beef is forecast to fall by 13 per cent to average 280 cents a kilogram (dressed weight) for the year.

Japanese demand for Australian beef to remain strong

Demand for Australian beef in Japan remained relatively strong in 2006, despite the resumption of trade between the United States and Japan from midyear. In the first ten months of 2006, Australian exports to Japan fell by 2 per cent year on year. Significant increases in feed grain prices in recent months resulting from the drought have increased the cost of supplying beef to Japan. As a result, Australian export prices for grainfed and grassfed beef increased significantly in the five months to November 2006, to average 553 and 523 cents a kilogram respectively.

Since the resumption of trade between Japan and the United States in July 2006, Japanese imports of US beef have been low because of the US beef industry’s inability to supply product that meets Japan’s strict import protocols. In August and September 2006, Japanese imports of US beef were just over 1000 tonnes or 2 per cent of total beef imports. Japanese imports of US beef are expected to continue to increase in 2007, as the United States adapts to Japan’s import protocols. Reflecting this, Australian exports to Japan are forecast to fall by around 3 per cent in 2006-07 to 378 000 tonnes (shipped weight).

Australian exports to Korea to increase

Beef trade between the United States and the Republic of Korea resumed in October 2006. However, uncertainty about Korean conditions for the import of banned ‘bone-in’ beef from the United States has slowed the resumption of trade. Korean customs had received only 9 tonnes of US beef by 10 November. As a result of this uncertainty, and the low level of beef stocks in Korea, demand for Australian beef has remained strong, with Australian exports to Korea increasing by 34 per cent year on year in the first ten months of 2006.

Korea recently agreed to remove some US beef products from the prohibited list and also indicated that cartilage, bone chips and breast bone would not be specified as BSE risk materials (BSE is bovine spongiform encephalopathy or ‘mad cow’ disease). However, uncertainty remains about the definition of ‘bone-in’ products. As a consequence US processors remain unwilling to export major volumes of beef in case import protocols are breached, leading to the shutting down of an export plant.

Without further clarification of the import protocols, US exports to Korea are not expected to increase significantly in the near future. As a result Australian exports to Korea are forecast to increase by 11 per cent in 2006-07, to 134 000 tonnes.

Korea to consider changes in import standards

The Republic of Korea recently made a commitment to reconsider its restrictions on US beef imports if the World Organisation for Animal Health (OIE) formalises a change in risk standards when it meets in May 2007.

The OIE is considering changing the procedure for determining the safety of beef, in particular for the spread of bovine spongiform encepthalopathy (BSE). Risk standards are currently based on the prevalence of the disease in a market and the age of animals destined for export. Under the new proposal, the risk standards would be based on an overall risk assessment of each market. The new assessment would be made under variables such as the strength and longevity of a ruminant, to ruminant feed bans, slaughter and processing methods, and surveillance testing plans.

Korea has stated that if the OIE were to decide to switch to such a standard, Korea would be willing to reconsider its import standards. Such a development may mean an end to the 30 months rule on age and the ban on bones, since most bones are not considered to be specified risk materials.

A change in risk standards is unlikely to affect Korean demand for imports of Australian beef in the short term. However, if these changes are approved in May 2007, increased Korean demand for US beef could result in Australian exports to Korea falling over the medium term.

increased Australian beef exports to the United States

Australian supplies of manufacturing beef are forecast to increase in 2006-07, reflecting increased cow slaughter and greater turnoff of secondary quality beef. In the first four months of 2006-07, yardings of secondary trade steers and cows increased sharply in Australia — by 28 per cent and 30 per cent respectively, year on year.

However, increased demand for Australian manufacturing beef in the United States in 2006-07 is expected to partially offset the effect on saleyard prices of the increase in manufacturing beef supply. Cow slaughter in the United States is forecast to fall in 2007 as US cattle producers rebuild their herds following dry conditions and the consequent higher turnoff rates in 2006.

In the United States, the lower available imports of manufacturing beef from Uruguay in 2006-07 will underpin strong US import demand for Australian manufacturing beef. As a result, Australian exports of beef to the United States in 2006-07 are forecast to increase by around 2 per cent to 300 000 tonnes (shipped weight).

beef and veal outlook
				2004		2005		2006		%
				-05		-06	s	-07	f	change
Cattle nos		million		27.8		28.6		27.9		– 2.4
– beef		million		24.7		25.5		25.0		– 2.0
Slaughterings		’000		8 853		8 401		9 000		7.1
Production		kt		2 162		2 077		2 160		4.0
Exports (shipped weight)
– to United States		kt		363		295		300		1.7
– to Japan		kt		419		388		378		– 2.6
– to Korea, Rep. of		kt		91		121		134		10.7
– total		kt		948		892		945		5.9
– value		A$m		4 584		4 272		4 026		– 5.8
Live cattle		’000		574		549		595		8.4
Price
– saleyard		Ac/kg		320		322		280		– 13.0
– US import		USc/kg		286		277		275		– 0.7
– Japan import		USc/kg		490		430		486		13.0
click to download excel data

drought in Australia to result in increased turnoff of beef cattle

With Australian farmers reducing their herd sizes to manage their way through the drought, cattle slaughter is forecast to increase by 7 per cent in 2006-07 to 9 million. Not surprisingly, this increase in slaughtering will constrain subsequent herd expansion activity, with the Australian cattle herd forecast to fall by over 2 per cent to a little under 28 million by June 2007. Based on the higher slaughterings, beef production in Australia is forecast to increase by 4 per cent in 2006-07 to almost 2.2 million tonnes. This increase is despite forecast lower slaughter weights resulting from reduced pasture availability and high feed prices.

Australian beef exports to rise

Australian beef exports 2006-07 are forecast in to increase by 6 per cent to 945 000 tonnes (shipped weight). This increase reflects increased domestic production and higher import demand from the Republic of Korea and the United States. However, the value of total Australian beef exports is forecast to fall by 6 per cent to $4 billion because of lower saleyard prices.

In the first four months of 2006-07, live cattle exports increased by 40 per cent year on year. This rise stemmed from increased stock turnoff and higher demand from key live export markets, including Malaysia, Indonesia and Israel. Increased cattle numbers following above average rainfall in northern Australia over the past nine months has increased the available supply of cattle for live export. As a result, live cattle exports are forecast to increase by 8 per cent to 595 000 in 2006-07.