Export market competition to drive prices lower
The weighted average saleyard price for cattle is forecast to fall in 2018–19, driven by falling export prices for beef and higher cattle turn-off. Increased competition from the United States in export markets is expected to more than offset increasing demand for beef in China.
US beef production is forecast to rise in 2018–19 following 4 years of national herd expansion. Higher production will decrease US demand for imported manufacturing beef from Australia and increase US exportable supplies. US exports of beef in the calendar year to August 2018 were 15% higher year-on-year. Most of this increase went to Australia's major Asian export markets—Japan and the Republic of Korea.
Chinese demand for beef to grow
Chinese demand for beef has been growing strongly because of rising household incomes and increasing urbanisation. China is now the world's second-largest importer of beef behind the United States. Chinese imports of beef are forecast to continue to rise in 2018–19 because
economic growth in China is assumed to remain strong. Australian exports of beef to China are also forecast to grow strongly and China is expected to rival the Republic of Korea as Australia's third-largest export market for beef.
Cattle slaughter to remain high
Ongoing dry conditions are driving higher than average cattle turn-off across eastern Australia. Cattle slaughter in the eastern states over August and September 2018 was at similar levels to those experienced during the 2013 to 2015 Queensland drought. The Bureau of Meteorology's 3-month outlook for December to February suggests below average rainfall and above average temperatures are likely in most major cattle-producing regions of Queensland and the Northern Territory. This is expected to continue the elevated supply of cattle at saleyards and contribute to falling saleyard prices.
Cattle slaughter and national saleyard prices, eastern states, January 2010 to September 2018
Note: Eastern states includes New South Wales, Queensland and Victoria
Sources ABARES; Australian Bureau of Statistics; Meat & Livestock Australia
Opportunities and challenges
High turn-off rates will prolong herd rebuilding
Higher female slaughter rates are expected to cause a contraction in the Australian national herd in 2018–19. This follows a period of significant herd contraction between 2013–14 and 2015–16. If conditions improve, the herd is expected to enter a rebuilding phase. However, the smaller breeding cow inventory will limit the number of births. This will slow herd rebuilding efforts and restrict the rate at which beef production can grow in coming years.
Cattle herd, Australia, 2000–01 to 2018–19
f ABARES forecast.
Source: ABARES (based on Australian Bureau of Statistics data)
African swine fever in China likely to disrupt global protein markets
An outbreak of swine fever in China is likely to cause disruption in global protein markets because China is the world's largest producer and consumer of pig meat. Since August 2018, more than 50 cases of African swine fever have been reported in China. The Chinese Government has imposed restrictions on the slaughter and transportation of live pigs in affected provinces. This is expected to cause a reduction in the Chinese pig herd and limit pig meat production. The extent of disruption will depend on Chinese disease containment efforts. However, China's demand for imports of pig meat is likely to increase and this is also expected to flow through to increased global demand for alternative proteins such as beef.
Poor conditions leading to higher feed costs
In Australia, prices for feed grains and fodder rose rapidly during winter. This resulted from dry conditions, lower winter crop prospects and biosecurity-related restrictions on imports. Higher domestic prices for feed limit Australia's ability to manage poor pasture growth with supplementary feed. As a result, slaughter weights are expected to average lower in 2018–19.
Index of Australian feed wheat and international wheat prices, July 2000 to October 2018
a Feed wheat, delivered Sydney (expressed in US dollar terms).
b US no. 2 hard red winter, fob Gulf.
Sources: ABARES; International Grains Council
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