Australia's struggling beef sector boosted by rains

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Australia's struggling beef industry has received a boost from recent rains in the east of the country, which will increase grass growth to fatten up herds in the world's third-biggest beef exporter, producers said.

The wetter conditions in the aftermath of Cyclone Oswald mean farmers will keep cattle in herds for longer to add weight, taking some Australian supply out of the market over the next few months before an increase later this year.

Global beef prices have hit record highs this year as U.S. cattle numbers fell for a sixth straight year in 2012 due to high feed costs after the worst drought in half a decade. (LIV/)

"I think through March, April and May, we will see a tightening of (Australian) supply," said David Farley, chief executive of Australian Agricultural Company, the country's largest beef producer.

This has already shown up in local prices with the Eastern Young Cattle Indicator, a benchmark collected by Australian Meat and Livestock Authority, rising to A$3.335 ($3.46) a kg last week, the highest since Nov. 26, before edging back slightly.

The Australian Department of Agriculture, Fisheries and Forestry (DAFF) forecast in December beef and veal exports would rise 2 percent in the 2012/13 marketing season.

Australia faces competition, however, from India, which is expected to expand beef exports by 29 percent this year, according to the U.S. Department of Agriculture, and in Japan, where Australia is the biggest supplier.

Japan agreed last month to allow U.S., Canadian and French beef imports from cattle up to 30 months old beginning on Feb. 1, relaxing a safeguard against mad cow disease that has frustrated North American producers for a decade.

Australia is the biggest supplier of beef to Japan and expects exports will fall 4.9 percent this year, though some doubt the ability of U.S. cattle farmers to meet Japanese demand.

"Any U.S. imports into Japan will only boost Australian exports into America," said Greg Campbell, chief executive of S.Kidman and Co Ltd, one of Australia's largest beef producers.

A strong Australian dollar could, however, price exports out of markets such as Japan, where the dollar is trading at a more than five-year high against the yen, Campbell said.

In contrast to the situation in the east, a delay in seasonal rains has stunted grass growth in the Northern Territory, home to 30 percent of Australia's cattle.

The territory accounts for 80 percent of live cattle exports and was hit badly by a cut in Indonesian demand due to a self sufficiency drive. Indonesia plans to cut import quotas in 2013 by 30 percent for cattle and 6 percent for beef, even as consumption is seen rising 13 percent..

Live cattle exports from Australia are forecast to fall 22.3 percent to 450,000 in 2012/13, the government has forecast, with the Northern Territory expected to bear the brunt.

A revival in Indonesian imports was possible if the self-sufficiency drive fails to hit government targets, Farley said.

"The self-sufficient policies that have been put in place a number of years ago were a gallant attempt, but it seems to have failed," Farley said. "The unintended consequences are that prices have gone up."

The Australian Agricultural Company reported on Jan 31 a full-year loss after tax of A$8.4 million ($8.75 million), but said it had boosted its breeding herd to 330,000 head and would maximise calf output to sell into rising global beef prices.



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