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AHDB European Market Survey

13 February 2012

AHDB European Market Survey - 10 February 2012AHDB European Market Survey - 10 February 2012

Meat and Livestock Australia forecast that 2012 will represent a record year for beef exports with volumes increasing almost three per cent to 975,000 tonnes.


Australian beef exports set for record year

This growth in exports will result from improved Australian production coupled with lower supplies from other major global producers. In the longer term Australian beef exports are expected to continue growing as production recovers as a result of the growing herd and better conditions on the ground. By 2016, exports are forecast to grow by 18 per cent compared with 2011 levels, as production increases by a similar amount.

Following a number of years of decline, Australia is one the few major beef producing countries forecasting higher production in 2012. This will be driven by a three per cent increase in the number of cattle slaughtered, forecast to be 7.55 million head, although this will still be lower than in 2007 and 2008. The heavier carcase weights recorded in 2011, as a result of better seasonal conditions, are expected to ease back by one per cent to 285 kg per carcase. While this is lower than 2011, it is still much higher than in other recent years, helping to keep production levels up. At 2.2 million tonnes, beef and veal production is forecast to increase by more than two per cent in 2012.

The projected growth in production in Australia is against the trend of forecasts for most other major producing regions. Global beef production is expected to decline as supplies in the Americas are constrained and other regions, such as Europe, also decline. These tightening supplies are expected to be met with increased demand for beef across the globe, especially from Asia, South America and the Middle East. This will help to keep beef prices firm across all regions.

The continued strength of the Australian dollar is expected to reduce returns for both exporters and producers. The strong currency is also likely to make US product more competitive and attractive on key markets, notably Japan and Korea. New restrictions on shipments to Indonesia may also result in reduced exports to another important market. Instead, the expected growth in exports will be fuelled by the US and in a number of other smaller markets. In the US, domestic production remains low and high beef prices will encourage the importation of more Australian product. Volumes are predicted to grow by more than a quarter, although they will still not be at the levels recorded prior to 2010.

The live cattle trade has been under considerable pressure over the past two years, with volumes in 2011 expected to be down 22 per cent once the December figures are published. With further restrictions on access to the Indonesian market having been announced, numbers are expected to decline further in 2012. Shipments are forecast to fall by 16 per cent as increases to some other markets fail to fully offset the large decline in trade with Indonesia.

Further fall in German cattle numbers

Total cattle numbers in Germany in November 2011 were down one per cent on the same month in 2010 at 12.5 million head. This followed a similar fall in numbers in the previous year. The most significant reduction was in male cattle aged above two years which were down 14 per cent on the year. There was also a four per cent fall in numbers of males aged between one and two years old. Contributing to the fall in male cattle numbers was the decrease in the cow herd that has taken place since 2008 and the high level of live exports in 2010. Male cattle slaughtering in January to November 2011 was down four per cent largely as a result of a reduction in numbers available on farm for finishing.

Numbers of cattle aged less than 12 months were unchanged on the year. Firm domestic cattle prices during 2011 resulted in more on-farm retentions and lower rearing calf exports, which made up three quarters of all live cattle exports and were down six per cent on the year at 434,000 head.

The number of heifers aged over one year was down three per cent on the year. This suggests a continued easing back in heifer replacement demand for breeding purposes Overall heifer slaughterings were up one per cent on the year.

Dairy cow numbers were little changed on the previous year with cow slaughterings down one per cent in January to November on the previous year. This was largely as a result of the improved dairy market with milk prices having improved and milk production increased. In contrast, beef cow numbers were down three per cent on the year.

The total number of German cattle holdings was down four per cent since November 2010 to around 168,000.

Irish beef production declines

According to the Irish Central Statistics Office, in 2011 cattle slaughterings were four per cent lower year on year at almost 1.65 million head. A number of factors contributed to this decline. The declining suckler herd over recent years has somewhat restricted the number of beef calves available for finishing, and the steep increase in live exports in 2010, particularly of calves, further limited availability. There were considerably fewer steers and heifers slaughtered, down 13 and seven per cent respectively while young bull throughputs were 22 per cent up on year earlier levels. An increase in carcase weights offset the lower throughputs to some extent with total beef production down two per cent on the year at 548,000 tonnes.

Cull cow throughputs were slightly ahead of year earlier levels at 337,000 head, with production from these animals up two per cent to 107,000 tonnes.

The tight supply of beef globally has resulted in competition for Irish beef being strong throughout 2011. As supplies tightened in the final quarter of the year, steer prices continued to improve reaching a high of €3.94 per kg dw in the final week of the year, a quarter higher than the price in the corresponding week in 2010. Into 2012, the Irish steer price levelled off at around €3.95 per kg during January. Demand for manufacturing beef on the continent and in Russia has resulted in cull cow prices maintaining their upwards trajectory with prices in week ending 29 January at a record high of €3.34 per kg, almost 25 per cent higher than in 2011.

According to Bord Bia, supplies at export plants are forecast to be between 50,000 and 80,000 head lower in 2012 than they were last year. As a result, production in 2012 is forecast to decline between three and five per cent. In addition, it is likely that the number of adult cow slaughterings will reduce due to herd rebuilding and the expansion of the dairy herd.

February 2012

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