The Australian weighted average saleyard price of beef cattle is forecast to increase slightly in 2007-08 to 294 cents a kilogram. This primarily reflects forecast lower Australian beef production and increased demand from restockers, assuming seasonal conditions improve in the first half of 2008.

Australian exports to Japan and the Republic of Korea in 2007-08 are forecast to fall for two main reasons. First, the appreciation of the Australian dollar relative to the Japanese yen and Korean won has resulted in reduced export demand for Australian beef. Second, rising feed costs have resulted in a decline in the number of cattle on feed, reducing the supply of grainfed beef suitable for export to the Japanese and Korean markets.

Australian production to fall in 2007-08
Australian cattle slaughter is forecast to fall by 3 per cent in 2007-08 to 8.8 million. Below average pasture availability and high grain prices in winter and spring resulted in increased cattle turnoff as producers reduced herd numbers to manage their way through the drought. Assuming seasonal conditions improve over the remainder of 2007-08, cattle slaughter is forecast to fall as producers begin to rebuild herds.

Australian beef production is forecast to fall by 4 per cent in 2007-08 to 2.1 million tonnes, largely because of the forecast decline in cattle slaughter. The high slaughter rates are forecast to lead to a fall in the size of the Australian cattle herd to 27.6 million by June 2008, slightly lower than a year earlier.

Australian beef exports to decline in 2007-08
Australian beef exports in total are forecast to fall by 5 per cent in 2007-08 to 925 000 tonnes (shipped weight), largely because of lower Australian beef production. The total value of beef exports is forecast to fall by 4 per cent to $4.4 billion, as a result of lower volumes shipped and the effects of a higher Australian dollar on prices received.

shipments to Japan to fall
Australian beef exports to Japan are forecast to fall in 2007-08 primarily owing to a reduction in the turnoff of grainfed stock because of high feedgrain and cattle prices. Reflecting the reduced number of cattle on feed in Australia, Australian exports of grainfed beef to Japan declined by 16 per cent year on year during the first four months of 2007-08, to 56 000 tonnes.

With feedgrain prices forecast to remain high throughout the remainder of 2007-08, Australian supplies of grainfed beef are likely to remain constrained. In addition, the high value of the Australian dollar against the Japanese yen is forecast to contribute to reduced export demand for Australian beef generally as it becomes less price competitive with US product. As a result, total Australian beef exports to Japan are forecast to fall by 6 per cent in 2007-08 to 380 000 tonnes. Australian export prices of grainfed and grassfed beef are forecast to increase by 18 per cent and 7 per cent respectively in 2007-08 to average 614 and 510 cents a kilogram.

Japanese import protocols remain unchanged
There has been minimal progress this year in negotiations between Japan and the United States on Japanese import restrictions on US beef. As a result, the import restrictions applied by Japan continue to constrain imports of beef from the United States. By way of example, Japanese imports of US beef in the first nine months of 2007 were 24 000 tonnes, compared with 198 000 tonnes in the corresponding period in 2003 — prior to the discovery of BSE (bovine spongiform encephalopathy or ‘mad cow’ disease) in the United States in December 2003. Reflecting the delays in negotiating expanded access for US beef, the process of altering the current protocols is not expected to be completed until at least the second quarter of 2008.

beef and veal outlook
				2005-06		2006-07		2007-08	f	% change
Cattle nos		million		28.8		27.8		27.6		– 0.7
– beef		million		26.1		25.1		25.0		– 0.4
Slaughterings		’000		8 401		9 081		8 800		– 3.1
Production		kt		2 077		2 226		2 138		– 4.0
Exports (shipped weight)
– to United States		kt		295		303		290		– 4.3
– to Japan		kt		388		403		380		– 5.7
– to Korea, Rep. of		kt		121		157		130		– 17.2
– total		kt		892		974		925		– 5.0
– value		A$m		4 272		4 634		4 430		– 4.4
Live cattle		’000		549		638		720		12.9
Price
– saleyard		Ac/kg		322		292		294		0.7
– US import		USc/kg		276		282		288		2.1
– Japan import		USc/kg		430		477		510		6.9
See back tables for details. f ABARE forecast.
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lower exports to Korea
Australian exports to Korea are forecast to fall by 17 per cent in 2007-08 to 130 000 tonnes. Lower domestic production and reduced cattle numbers on feed are expected to be the main factors limiting exports to Korea in 2007-08. In addition, there may be increased competition from US beef next year.

Changes to Korea’s import protocols allowing imports of US bone-in beef are not expected until the first half of 2008. In October, Korea suspended quarantine inspections of US imports following the discovery of vertebral column in a shipment of US beef. The suspension is expected to remain in place until a new health protocol for bone-in beef can be negotiated between the two countries.

Australian feedlot numbers to fall in 2007-08 The number of Australian cattle on feed declined by 22 per cent in the September quarter 2007, as high feed grain prices reduced the viability of grainfed beef production. Declining global grain stocks and uncertainties about world supplies, in addition to drought affected domestic production, contributed to a substantial rise in grain prices. For example, the cash price of wheat (delivered Sydney) used for livestock feeding averaged $458 a tonne in October 2007, 53 per cent above the average price in June 2007. The reduction in cattle numbers on feed led to a fall in grainfed beef supplies, and resulted in a rise in average Australian export prices of grainfed beef. With feedgrain prices forecast to remain high in the short term, numbers of cattle on feed are forecast to fall again in the December quarter, resulting in a further reduction in grainfed beef supplies.