Home > Record export volumes of Australian beef achieved, prices slowly rebound – Rabobank

Record export volumes of Australian beef achieved, prices slowly rebound – Rabobank

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article image Rabobank senior animal proteins analyst Sarah Sivyer

The Beef Quarterly report by specialist agri lender Rabobank reveals that record export volumes for Australian beef have been achieved throughout the month of May, with prices also beginning to rebound following the recent local rain.

Rabobank’s Beef Quarterly report highlighted that a very dry wet season in the north of Australia combined with dry conditions in southern Australian has seen an extra 260,000 heads of cattle processed relative to the same time last year.

This surge in supply caused the Eastern Young Cattle Indicator to fall AUDc 66/kg or 19% in Q2 2013, settling at a low of AUDc 278.75/kg in mid-May. Much needed rain in key areas has seen the EYCI recover to AUDc 330/kg at the end of the first week of July.

Rabobank senior animal proteins analyst Sarah Sivyer said that the records in production equated to an extra 50,000 tonnes to the end of April, or a 7.8% increase on 2012 figures. She adds that the historically high levels of production have led to record monthly export volumes, with the milestone mark of 100,000 tonnes being reached in May – the first time such a volume has been achieved.

The Rabobank report said export volume records continue to be set across a number of markets. China has taken 62,421 tonnes of Australian beef in 2013, relative to 3,048 tonnes in the same time frame in 2012 - this increase is being driven by availability of product in Australia, and Chinese willingness to pay more to attract product away from other markets.

Exports to the Middle East also hit record highs in May, mostly a result of very strong demand being seen in Saudi Arabia (3,773 tonnes) with a 455% increase relative to May 2012. Saudi Arabia locked Brazilian exports out at the end of 2012 and Australia was well positioned to satisfy this gap in supply.

Korea and China have been battling for the title of Australia’s third-largest monthly export market, with China leading the way for most of 2013.

Ms Sivyer also notes that despite production being up 7.8% for the first four months of this year relative to the same time in 2012, production for the second half of 2013 will depend on the weather, and may be down on the highs of October and November 2012, which were driven by the start of the dry conditions.

Global snapshot

The Rabobank report sees a gloomier landscape for the beef industry in the US with feedlots still being hit by the continuation of strong feed grain prices and insufficient decline in feeder cattle costs. However, despite these challenges, packers have been posting improved margins since May.
Interestingly, total US production year-to-date is larger than expected, mostly attributable to escalated cow slaughter.

Prices in the European Union continued to increase as a result of a combination of the higher price demand for beef – as many players have had to replace horsemeat with ‘real beef’ – and tight supply.

Outlook

Rabobank maintains the view that global beef supplies will remain near 2012 levels, with a bias towards a minor increase driven by the Southern Hemisphere – led mainly by Brazil, Australia, Argentina, Uruguay and New Zealand – coupled with continued liquidation in US beef supply given the ongoing drought induced cow-herd liquidation. In addition, beef exports from India have moderated considerably.

Ms Sivyer explains that the broader picture for demand still points to tempered consumer appetite to paying high prices for beef as increases in disposable income worldwide appear to be slowing and threats of inflation continue across the globe.

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