Report Highlights:

Exports of Australian beef are forecast to reach an historically high level in 2005 on the strength of Japanese and Korean demand. Australian feedlot capacity has surpassed one million head. Current record beef and cattle prices are dependent on four major markets (domestic, Japan, Korea and the U.S.), which account for 95 percent of Australian production.

Situation and Outlook

Australian livestock industries have experienced relatively extreme conditions over the past three years. Severe drought conditions have sharply reduced feed grain and fodder supplies and created downward pressure on inventories. The drought, which began in CY 2002 and ended midway through CY 2005, is regarded by many as the worst in 100 years.

More recently, heavy soaking rains in many of the livestock producing and feed grain growing areas, have seen pasture conditions and fodder reserves improve greatly. This circumstance is likely to see average cattle slaughter fall for CY 2005 and CY 2006 and inventories rise. Production of beef is expected to rise in CY 2005 however, as slaughter weights improve with seasonal conditions. Production is expected to fall slightly in CY 2006 as producers continue to withhold cattle from slaughter for breeding purposes.

Exports of Australian beef are forecast to remain at historically high level for CY 2005 and CY 2006 as export demand maintains its strength. The absence of US beef from the Japanese market has resulted in record exports and the Australian feedlot industry has reacted by increasing capacity, with record numbers on feed.

The strength of the Australian dollar continues to constrain performance for export dependant industries such as pig meat. A higher dollar has reduced export returns and increased consumer buying power in relation to imports. Pork imports are forecast at record levels for CY 2005 and CY 2006. Exports are forecast to increase modestly.

A Federal Court ruling in the first half of CY 2005 created uncertainty for future pork imports. This ruling was recently overturned under appeal, however the intermittent period saw high levels of pork imports, particularly from the United States, in anticipation of a trade impact. Following the favorable ruling, post expects monthly import levels to revert those experienced prior to the court ruling with imports poised to resume the long-term growth trend established over the past decade.

Inventory

Inventory for CY 2006 is forecast to close at 2.6 million head, unchanged from the estimate for the previous year. Increasing pressure from imports and the continued strength of the Australian dollar are expected to limit increased inventories, despite improved supplies of grain. Closing inventory for CY 2006 is forecast to remain unchanged at 2.6 million head.

Slaughter

Total slaughter for CY 2006 is forecast at 5.35 million head, up significantly on the 5.27 million head estimated for the previous year. An increase in sow numbers is expected to increase turnoff and slaughter. Post anticipates the pig industry will grow beyond CY 2006 having reconsolidated in CY 2005 and CY 2006.

The slaughter estimate for CY 2005 has been revised downwards slightly to 5.27 million head. ABS year-to-date data shows declining slaughter levels towards the second half of CY 2005 compared with the same period for the previous year. Post anticipates that the slowing slaughter rate will slightly lower slaughter over CY 2005.

Production

Total pork production is forecast at 395 TMT in CY 2006, up slightly on the 385 TMT estimated for the previous year. Improved availability of grain due to an ending of drought conditions is expected to see pork production increase slightly due to improved slaughter weights, despite falling slaughter levels. The Australian pig industry has established a longterm trend for gradually increasing slaughter weights as feed grain supplies allow.

Production for CY 2005 is estimated at 385 TMT, down slightly on the 394 TMT recorded for the previous year. The estimated decline is in line with ABS year-to-date data showing a two percent decline for the first half of CY 2005.

Trade: Imports

Total imports for CY 2006 are forecast at 95 TMT (CWE), up on the 90 TMT estimated for the previous year. If achieved, this would represent an all-time record in Australian pig meat imports. The United States has emerged as a significant supplier of imported pork. Pig meat imports for CY 2005 are estimated at 90 TMT (CWE), up sharply on levels recorded for the previous year.

Pork imports for CY 2004 have been revised downwards slightly to 76 TMT (CWE), in line with revised ABS statistics. This equates roughly to a shipped weight volume of 61 TMT. Post uses a conversion factor of 1.25 to convert shipped weight to Carcass Weight Equivalent (CWE).

Exports

Exports of pig meat for CY 2006 are forecast at 58 TMT (CWE), up on the revised estimate of 55 TMT for the previous year. Slightly higher production levels are likely to see exports increase slightly. Exports for CY 2005 are estimated at 55 TMT, down slightly on the previous year and down sharply on the figure quoted in Post’s previous report. Official ABS year-todate figures have exports down significantly compared to the same period in the previous year. A stronger Australian dollar has lowered the prospects for pork exports in CY 2005.

Consumption

Domestic consumption is forecast at 430 TMT for CY 2006, up on the 420 TMT estimated for the previous year. A general trend towards pork and poultry has seen consumption of pork increase steadily over the past decade. Furthermore, the ever-broadening cultural base within Australia has seen dietary intake change over the past decade with the inclusion of more Asian style meals. This trend has aided increased consumption of pig meat domestically.

Prices

The prices received by Australian pig meat producers have generally been considered low in recent times. This combined with high feed grain prices and low feed grain availability during the drought saw diminishing margins in the pig meat industry. ABARE have forecast pig meat prices to remain relatively low for the remainder of CY 2005 and into CY 2006. This is likely to constrain heard expansion to minimal levels.

Policy: AUSTRALIAN FEDERAL COURT UPHOLDS PORK APPEAL

On September 16, the Full Bench of the Australian Federal Court upheld the appeal by Australia’s Director of Quarantine against a May 27, 2005 Court judgment affecting the importation of pig meat into Australia. Australian Pork Limited (APL) and Windridge Farms had challenged a policy determination by the Director of Quarantine that set conditions for the importation of pork. The APL action had also challenged the subsequent issuing of one specific import permit based on the policy conditions.

The Court Decision means that pork from third countries may enter Australia under the existing conditions. Further, the current 83 import permits remain valid and new import permits may be granted. The permit that had been suspended is re-validated. Consideration of the additional countries seeking access for pork to Australia (Italy, Sweden and Finland) will continue.

The Full Court Decision is available at the following website:
http://www.austlii.edu.au/au/cases/cth/FCAFC/2005/206.html

Suspected Case of Post Weaning Multi-Systemic Wasting Syndrome (PMSW) in Australia: The results remain inconclusive on the suspect case of PMSW in South Australia. Restriction of movement continues from the state and the investigation is continuing.

Further Information

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Source: USDA, Foreign Agricultural Service - Annual Livestock and Products Report - September 2005