Home > Global beef demand remains tight while Australian cattle prices decline

Global beef demand remains tight while Australian cattle prices decline

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article image Rabobank Senior Analyst Wendy Voss

A recent Rabobank Beef Quarterly reports on the rapid decline in cattle prices in Australia, which are due to several factors including the season, the high Australian dollar, and the subdued demand in some key export markets.

Rabobank Senior Analyst, Wendy Voss, says Australian prices will likely remain under pressure for much of the third quarter before seeing some improvement.

“The first reason for the decline is seasonality as the supply of cattle going to market increases in northern Australian as the wet season ends and mustering can begin,” says Voss.
The Korean and Russian markets had provided strong demand in the first quarter of the year. However, sales have slowed as importers looked to reduce some of the large stocks of beef purchased earlier in the year.

“The Australian dollar is also putting significant pressure on export returns, with the currency at record levels against the US dollar.”

More contributing factors included the Australian government’s decision to suspend live exports to Indonesia in June after follow reports of mistreatment of Australian cattle in Indonesian processing plants. Even though the ban only lasted less than a month, exports are expected to remain below pre-ban levels due to the restrictions on the number of abattoirs that are able to process Australian cattle.

Rabobank predicts the third quarter for the global beef demand will remain tight due to ongoing herd rebuilding in Brazil, Argentina, Australia and Uruguay, as well as seasonal dryness in key countries and high grain prices globally. The report also predicts these factors would also affect production in regions within the EU and the US.

“The US has become a net exporter of beef this year due to a lower US dollar, robust global demand driven by supply challenges in Japan and Korea and contracting imports as the lower US dollar makes alternative marketers more attractive to suppliers such as Australia, New Zealand and Canada.”

Voss expects this trend to continue throughout 2011.

Rabobank’s Beef Quarterly report concludes that the beef demand should remain firm over the coming months, however, with the current challenging macroeconomic scenarios in the US and the EU, as well as the recent tightening monetary policy in emerging countries, could cool down consumers’ willingness to pay for more beef.

Globally, beef prices will remain firm in the mid-term, although a further significant increase could trigger consumers’ looking for substitution with other meats.

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