Saturday, March 2, 2024

Aussie beef to stiffen export competition

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After a balmy two years, when NZ had much of the beef export market to itself, a lift in competition from Australia is on its way.
Australia’s herd rebuild has been so successful, its national cattle herd is forecast to reach its highest level since 2014 – 28.8 million head by June 30.
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New Zealand beef exports have been enjoying less competition from across the Tasman for the past two years as Australian producers concentrated on rebuilding their beef herd amid favourable conditions. 

But, while overseas demand for beef remains positive, a lift in export competition from Australia is inevitable with likely implications for NZ beef. Australia’s rebuild has been so successful, its national cattle herd is forecast to reach its highest level since 2014, inflating to 28.8 million head by June 30. Only three years ago herd numbers were down as low as 24.6 million head. Ultimately this leads to increased beef production and therefore higher availability of Australian beef in global markets. 

Meat and Livestock Australia (MLA) is projecting that 2023 Australian beef exports will push over 1 million tonnes. This follows two low years through the herd rebuilding phase, when exports struggled to reach 900,000t. It’s no coincidence that through that period of low Australian beef exports, NZ beef performed favourably, relishing the lower competition within global markets.  

This spike in Australian beef exports won’t be a one-off. Forecasts point to exports holding above 1 million tonnes in 2024 and 2025. Supporting this forecast is the assumption that by 2025 the national cattle herd is forecast to reach 29.6 million head, the highest level since the 1970s.

Whether increased beef export competition happens this year or next will be determined by the capacity of Australia’s meat processors to manage an increase in supply.

With such bullish growth to herd numbers, Australia is set to benefit from ample cattle supply even at the finishing end. MLA forecasts that a total of 6.625 million head of cattle will be slaughtered this year, up almost 500,000 head on last year. 

But this will only come to fruition if Australian processors have the labour force available to lift capacity and manage the surge in supply. By comparison, Beef + Lamb NZ has forecast a 1.2% lift for the 2022-23 season NZ cattle slaughter to 2.69 million. This makes up just 41% of Australia’s forecast cattle slaughter for this year.

Just like NZ, meat production in Australia has been impacted by labour shortages at processing plants. The Australian government has indicated that more skilled workers will be able to enter Australia this coming year to help alleviate these labour issues at a processing level. 

If labour shortages persist and processors are unable to increase capacity, cattle slaughter is projected to remain at last year’s level of 6 million head. That is only going to drop a bigger slaughter issue into the 2024 calendar year as cattle back up. 

On the flip side, if production can’t expand then exports will fail to push towards current expectations, delaying competing from building in export markets. MLA’s latest report also expects that the labour issues will have eased by 2025, bringing the cattle slaughter up to 8 million head, a 30% increase on 2022’s estimated slaughter figure of 6.02 million head.

A large proportion of Australia’s grass-fed beef heads to the United States, so it is a key market that both NZ and Australia compete for when it comes to beef exports. In recent years, Australia’s beef shipments to the US have been well down. In 2022, just 133,841t of Australian beef was shipped to the US, whereas between 2017-2019 shipments were over 230,000t. 

This decline has been partly due to herd rebuilding but also because of a focus on supplying other markets, such as Japan and South Korea. With the end of La Niña on the way, it’s hoped that the weather will improve, easing drought conditions in the US. This would allow the US to move back into a herd rebuilding phase sometime this year. 

When this occurs, the US is likely to revert to being a net importer of beef following two years of high slaughter and beef production. Compared to the last major US drought in 2010-2012, significantly more beef cows and heifers have been slaughtered this time around. Therefore, US demand for beef from overseas markets is expected to remain strong for longer this time as herd rebuilding takes place.

Global weather modelling is indicating a high chance that an El Niño weather pattern will develop mid-way through this year. Historically, El Niño has caused drier weather on the eastern side of Australia and NZ. This could limit further growth in cattle herds in the coming years, but could also push more cattle into the processing system if droughts appear.

With Australian beef production expected to ramp up this year, it’s going to mean a larger supply of beef on the market competing with NZ beef exports. If demand isn’t strong enough to absorb it, prices will be impacted. However, if the US can move into a herd rebuilding phase, it will help alleviate some of the pressure as Australian beef will be able to fill gaps in other markets such as South Korea and Japan that the US is unable to supply.

This article was written by AgriHQ analyst Haley O’Driscoll. Haley’s reports provide key insights into what makes our sheep and beef markets tick. Subscribe to AgriHQ reports here.

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