Highlights

Prospects for the Australian cattle industry have been remarkably transformed due improved climatic conditions experienced over the calendar year (CY) to date. Inventories of cattle are expected to grow as slaughter declines and this will likely see production and exports of beef (and to a lesser extent live cattle) decline. Closing inventory for CY 2011 is forecast at 28.5 million head, the highest since 1978. Total pig slaughter is forecast to increase in CY 2011, as is production and to a lesser extent exports.

Summary

Total pig slaughter is forecast to increase in CY 2011, as is production and to a lesser extent exports. Improved fodder and grain supplies are expected to see production expand following years of drought and poor profitability. However, Post has revised its forecasts for rate of growth downwards in line with year–to-date figures for CY 2010. Post believes that recovery from drought towards levels of production more reflective of the longer term average will now be a slower process due to the unforeseen level of retired capital and the number of growers that have exited the industry.

Swine Inventory

Swine closing inventories for CY 2011 are forecast at 2.50 million head, up on the 2.45 million head estimated for CY 2010. Closing inventory for CY 2009 has been revised upwards from 2.30 million head to 2.302 million head, in line with recently released official ABS statistics.

Pig inventories are expected to continue building as supplies of fodder and feed grain also continue to rebuild following years of drought. Poor returns and record high grain prices had seen pig numbers fall considerably in Australia from 2005/06 to 2009/10, according to historical data.

Slaughter

Total pig slaughter for CY 2011 is forecast at 4.7 million head. Slaughter for CY 2010 has been revised downwards to 4.6 million head, well below Post’s previous estimate. Year-to-date slaughter figures for CY 2010 show slaughter at levels below the same period for CY 2009.

The pig meat industry is believed to be recovering more slowly than previously anticipated. Very harsh economic conditions since the drought began in CY 2002 have seen significant levels of productive capacity retired and many producers exit the industry. Post believes that, moving forward, this will continue to partially constrain growth despite the recent improvements in profitability.

Production

Total pig meat production for CY 2011 is forecast at 346,000 metric tons (MT), up slightly on the revised estimate for the previous year. Increased production is primarily driven by increased slaughter as the industry slowly begins to recover following a year of poor prices and declining slaughter numbers.

Production estimates for CY 2010 have been revised downwards in line with partial year production data for CY 2010. The recovery process will likely be slower than previously expected.

Trade

Total imports for CY 2011 are forecast at 200,00MT (CWE), slightly up on CY 2010. Despite this increase, post believes that increasing local production will likely place some constraint up future growth in pig meat imports.

Imports of pig meat for CY 2010 have been revised upwards to a record 195,000MT, surpassing previous expectations. Mid-year import data shows strong growth in pig meat imports. Imports of pig meat from the US continue to trend in line with total imports.

Total exports of pig meat for CY 2011 are forecast to increase only slightly to 40,000MT (CWE) as the industry slowly increases production following years of poor returns. Exports for CY 2010 have been revised downwards in line with recent mid year data showing exports lower than previously expected. Despite this increase, if achieved, this level of exports would remain well below the long-term average.

Further Reading

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September 2010