THE global economic crisis is expected to continue putting pressure on Australian beef prices, with the industry’s biggest export customer amongst those hardest hit.
The forecast comes in the latest edition of Commodities Wrap from the National Australia Bank (NAB), released today in conjunction with the NAB Agribusiness sponsorship of the Australian Meat Industry Council (AMIC)’s annual conference on the Gold Coast.
Beef is the ‘commodity in focus’ for September, with a detailed review of the outlook for the Japanese economy.
NAB’s general manager of Agribusiness, Khan Horne, said Japan is vital to the industry, taking around one-third of Australia’s beef exports.
“Beef exports to Japan have remained relatively strong, dropping just 2 per cent in the first eight months of 2009 to around 241,000 tonnes,” Mr Horne said.
“However, there’s been a shift to lower value cuts as rising unemployment and falling household incomes have affected Japanese consumers' capacity and willingness to spend.
“While NAB’s outlook for Japanese economic growth has improved, a contraction is still forecast - so demand for beef is not expected to increase in the short term.”
Mr Horne said that, while recent rainfall stimulated buyer activity at saleyards, more is needed.
“The Eastern Young Cattle Indicator (EYCI) declined by 3 per cent in August 2009, in line with a seasonal increase in supply of young cattle and limited restocker demand.
"A lack of rainfall in many areas is likely to result in a greater turnoff of young cattle over coming months, placing more downward pressure on saleyard prices.
“The bright spot for beef prices is domestic demand.
“The number of Australian cattle on feed increased by 10 per cent in the June quarter 2009, supported by low grain prices and sustained domestic demand for grain fed beef, with domestic focussed feeding increasing to 32 per cent of numbers on feed,” Mr Horne said.
Other information contained in Commodities Wrap includes the impact of the global economy on rural Australia and an overview of key commodity prices and macroeconomic drivers such as interest and exchange rates.
The report says that NAB is expecting the AUD/USD exchange rate to end the year around the US86 cent level, putting pressure on the competitiveness of exports, including beef.
More generally, the NAB Agribusiness rural commodity index declined by 2 per cent in AUD terms in August 2009 and is expected to fall further, as forecast weaker prices for grains, dairy and cotton offset higher prices for lamb, beef and wool.
Mixed results across the country have NAB revising its grain production prospects downwards from previous forecasts, to a 5 per cent increase in 2009-10 to 22.5 million tonnes.
This reflects below average winter rainfall throughout much of the Australian grain belt, even though South Australian wheat production is expected to be the largest since 2005-06, and Western Australia is also looking promising.
A better global outlook now has NAB expecting the Reserve Bank to increase the official cash rate with three consecutive 25 point increases in November, December and February, taking the policy rate to 3.75 per cent by early 2010.
* The Commodities Wrap is available to download, from the NAB Agribusiness website.
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