industry overviewBeef production is widespread across Australia. In northern Australia, production is based mainly on native pastures on large properties; in the southern states, smaller properties with a high degree of pasture improvement predominate. Extensive grazing by sheep and cattle occupies approximately 60 per cent of the rangelands, which in turn represent about 80 per cent of Australia’s land area.

Cattle are frequently transported within and between regions in response to seasonal conditions and for breeder replacement, growing out or finishing, live export and slaughter. An increasing number of cattle are being fattened in feedlots concentrated in the major agricultural regions in southern Queensland and New South Wales.

markets
In farmgate value, 64 per cent of the beef cattle turned off for slaughter from Australian farms over the three years to 2004-05 was exported.

The Australian beef industry is relatively lightly assisted. The OECD has estimated the monetary value of transfers from consumers and taxpayers to support beef meat producers as a result of policy measures. They reported that, in Australia, this assistance was equivalent to 3 per cent of producers’ gross incomes in 2004 (OECD 2005).

In comparison, beef producers in the European Union received assistance equivalent to an estimated 60 per cent of their gross incomes in 2004. Producers in Canada received 25 per cent, in Japan 31 per cent, in the Republic of Korea 56 per cent and in the United States 4 per cent.

Australia’s principal export markets for beef are Japan (419 000 tonnes in 2005-06), the United States (363 000 tonnes) and the Republic of Korea (91 000 tonnes). Access to all three markets is restricted — by high tariffs in Japan and Korea, and by tariff quotas in the United States. The recent Australia–United States Free Trade Agreement will result in the latter restrictions being phased out over the long term. Although the European Union is a potentially important market for higher value beef, access is tightly controlled by quotas.

Most beef exported from Australia is in ‘bone out’ form and is chilled or frozen according to the requirements of the intended market. An increasing amount of product supplied is company branded.

As countries such as Argentina and Brazil are able to demonstrate longer term freedom from foot and mouth disease, they are likely to provide increasing competition for Australia in major markets.

Around 500 000 – 600 000 live cattle, valued at A$350 million, are exported from Australia annually. Western Australia and the Northern Territory together ship out around 70 per cent of these cattle. Indonesia is Australia’s largest export market, taking 55–60 per cent of the trade.

Average slaughter weights rose from around 220 kilograms to 246 kilograms in the ten years to 2005-06, in large measure because of the growth in numbers of cattle finished on feedlots both for the export trade and for a growing domestic trade. Most feedlots are in southern Queensland and New South Wales, where there is good access to supplies of store cattle, grain and other feedstuffs.

Overview of production and trade – beef 1985-86 1995-96 2005-06 World Production Mt 50.9 54.6 65.9 Trade a Mt 3.2 5 6.7 Australia Beef cattle numbers million 20.1 23.6 25.5 Average slaughter weight kg/hd 188 220 246 Production kt 1 385 1 745 2 060 – share of world production % 2.7 3.2 3.1 Gross value of production b A$m 4 873 4 557 7 419 Domestic consumption a kt 668 711 747 Exports – beef c kt 468 738 891 – live cattle d ’000 na 616 518 – value b A$m 2 659 3 475 4 742 – share of world trade % 22 22 19 Imports kt na 5.6 8 Employment e – production f ’000 na na 47.1 – processing g ’000 na na 17.8 a Carcass weight equivalent. b In 2005-06 dollars. c Shipped weight. d For slaughter. e ABS (2001a). f Farmers/managers and other employees in the beef specialist industry only (an additional 18 000 people are employed in the mixed beef−sheep industry). g Includes all meat processing. na Not available. Sources: ABARE (2005, 2006); ABS (1990, 2001a,b).

Features of beef specialist businesses – Australia   Average per farm 1985-86 1995-96 2005-06 p Number of businesses no.  13 954  20 239  21 189 Average performance Area operated ha  19 175  12 312  13 322 Cattle numbers no.  1 010 719 924 Cattle sales a A$  100 379  125 506  222 215 Total crop sales A$  2 809  8 067  5 110 Sheep sales A$ 499 789  3 884 Wool sales A$ 385 863  1 664 Net farm cash income a A$  11 546  16 436  14 112 Farm business profit a A$ –4 345 –27 841 –12 111 Capital investment a A$  809 422 1 623 534 3 086 123 Return on capital b % –0.7 –3.2 –2.1 Farm debt A$  72 966  135  436  256 947 Off-farm income a A$ na  29 596 na Largest 30% of farms c Share of industry output % 73 74 83 Beef cattle sold no. 699 521 828 Net farm cash income a A$  26 866  60 121  72 224 Farm business profit a A$  16 368 –2 628  49 909 Return on capital b % 3.2 –0.5 1.5 Other 70% of farms c Share of industry output % 27 26 17 Beef cattle sold no. 113 98 83 Net farm cash income a A$  4 992 –2 108 –10 578 Farm business profit a A$ –13 206 –38 543 –38 461 Return on capital b % –2.3 –4.3 –3.7 a In 2005-06 dollars. b Excluding capital appreciation. c Ranked by value of output. na Not available. p Provisional estimates. Source: ABARE farm surveys.

The removal of Japanese beef import quotas in the early 1990s was the major driver behind a rapid expansion of Australia’s feedlot sector. By 2002, there were about 600 accredited feedlots in Australia, with a total capacity of around 860 000 cattle. A number of the feedlots producing for overseas markets (especially Japan) were wholly or partly owned by Japanese investors.

As Australian consumers acquired a taste for grainfed beef, the proportion of cattle finished in feedlots for the domestic market rose from around 20 per cent to 40 per cent between the mid and late 1990s. Supermarkets are drawing an increasing proportion of their beef requirements from feedlots.

In volume consumed, however, chicken meat is close to replacing beef as Australians’ preferred meat, largely because of product innovation and declining relative prices.

Food safety demands of consumers worldwide are increasingly important. The beef industry is addressing this issue, in part through the National Livestock Identification System, which will facilitate the traceback of meat from retail outlets to farms.

farm businesses Beef specialist farms are farms that make most of their income from the sale of beef cattle. Beef cattle prices relative to prices of farm inputs used in beef production are expected to continue to decline over the longer term. This phenomenon, which is common to most agricultural industries, is occurring because global production is growing faster than global demand, causing commodity prices to fall in real terms (that is, net of inflation). Between 1977-78 and 2002-03, beef cattle prices rose on average by 3.3 per cent a year, but input prices rose more rapidly by 4.8 per cent a year.

Because of the long term trend of declining prices relative to input costs, productivity gains in the beef producing industry will be important for international competitiveness and for determining the allocation of farm resources between beef and other enterprises.

Over the years since 1977-78, beef specialist producers have increased productivity by an average 1.6 per cent a year. The rate of gain was even higher in the 1990s, averaging 2.1 per cent a year — largely as a result of strong performance in northern Australia. The northern Australian industry was able to lift productivity by an average 3.3 per cent a year between 1988-89 and 2001-02, as the emergence of a substantial live cattle export trade encouraged the turnoff of smaller and younger animals.

Overall, productivity growth has been closely related to farm size, with the largest third of beef farms achieving strong productivity growth, and the remainder showing little or no improvement.