GROWING competition in international beef markets, particularly from production powerhouse Brazil, is finally starting to show through in Australian cattle price forecasts from senior economists.
Herd rebuilding and red hot restocker demand has so far shielded the cattle market from a global situation moving in the opposite direction and is expected to continue to provide support for high cattle prices out until the end of 2017-18.
However, weaker export returns will exert downward pressure in the medium term, according to the latest Australian Bureau of Agriculture Resource Economics and Sciences (ABARES) outlook, released today.
While the weighted average saleyard price of beef cattle this financial year will represent a 7 per cent increase at 540 cents a kilogram dressed weight, and that figure is expected to hold in the following year, the decline will start to come thereafter.
ABARES calculations has that average price, in real terms, at 465c/kg by 2021-22.
Increased production, as the supply of cattle for slaughter grows with the herd expansion, will coincide with the much-touted tough export trading conditions in that timeframe.
The sharp drop in slaughter this financial year should flow through to a rebuild to the tune of 3pc to 24 million head by June.
However, fewer heifers and cows on farm will hold the rate of rebuild back, with the forecast for just a 2pc a year expansion out to 21-22.
While export volumes will start to grow again with that lift in production, ABARES believes the average export unit values will fall.
In 2021-22, the value of Australian beef and veal exports is projected to be around $7.1 billion in real terms, which is where it should finish this financial year - representing a 16pc contraction against last financial year.
The biggest hit will be taken in the United States, traditionally our strongest market in both volume and value.
Our exports to the US, dominated by grinding beef, are forecast to fall by 42pc in 2017-17 to just 195,000t shipped weight and then by a further 2.6pc the following financial year.
While our exports to the US will rise gradually from there on, big growth in the US’s own production courtesy of a rebuilt herd, and the fact Brazil has just regained access to the US market, should curtail import demand.
ABARES points out in the December 2016 quarter, the average import unit value of Brazilian beef was US$4.01 a kilogram compared to the Australian average of US$6/kg.
Competition from the “beefed up” US in another of Australia’s prized markets, Japan, will also be felt over the medium term.
Australian beef exports to Japan are forecast to fall in 2017-18 by 2pc to 255,000t before declining to around 240,000t by 21-22.
In the live trade arena, export unit values for feeder and slaughter cattle this financial year will be the highest average on record in real terms, according to ABARES calculations.
While numbers shipped will drop back 18pc to 915,000 head on account of the supply shortage in Australia, the average per head value will be around $1230.
Indonesia will still be the largest market, taking half the trade.
However, in the medium term, Indonesia’s share will decline as the China trade builds and numbers to Vietnam grow.
The ABARES Outlook Conference, which kicks off in Canberra today, will look closely at how the global beef market is both expanding and changing and how Australian businesses will need to adapt and utilise new technologies and information to prosper.