MLA Cattle industry projections 2010
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MLA Cattle industry projections 2010

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MLA Economist, Tim McRae, details the opportunites and challenges for Australia's cattle industry in 2010.

MLA Economist, Tim McRae, details the opportunites and challenges for Australia's cattle industry in 2010.

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    MLA Cattle industry projections 2010 MLA Cattle industry projections 2010 Presentation Transcript

    • 2010 Cattle and Beef Industry Projections 18th February, 2010 Tim McRae, Economist, Meat & Livestock Australia
    • Beef industry status Farm • Sale prices down 15% in 4 years (5% in 2009) • Incomes squeezed & less attractive than crops & prime lambs • Drought receding in many areas • But little evidence of desire to rebuild herds, except in far north Processors/exporters • Export prices down 33% to US, 5% grassfed & 13% for grainfed fullsets to Japan – partial recovery since November • Low co-product returns • Throughput down 3% in 2009 & 4.5% fall expected in 2010 • Some works closing & many working less shifts Live exporters • Buoyant Indonesian demand • Exports up 9% in 2009 & further 4% expected in 2010 Retailers/foodservice operators • Foodservice tough in 2008 & until early 2009 but fast recovery since • Retail sales good • Consumers still trading down (frugal)
    • The two key Projections 2010 assumptions • A$ to average 90US¢ - up 13.5% – Implies continued pressure on exporters, growth in product on domestic market & limited scope for cattle price rises • Better seasonal conditions than in 2009 – Excellent start to the year, with excellent falls throughout NT, Queensland, NSW and Victoria. Autumn still critical for southern regions. – Implies better stock condition, demand for stores, an opportunity to end herd decline & better cow & young cattle prices
    • Outlook for the A$ in 2010 A$/US¢ 2010 average Mar 10 Jun 10 Sep 10 Dec 10 Mar 11 Jun 11 at 17th Feb St George 90.15 85 88 91 93 85 - Westpac - 86 85 90 95 93 - ANZ - 89 87 86 85 82 - Commbank - 87 88 87 85 82 - CME Futures - 89 88 88 87 86 85 The Sydney Morning Herald – 5th February 2010 “Most banks see the Australian dollar hovering around $US0.9000- $US0.9190 in the next 12 months with a chance of it hitting parity against the US dollar still intact” “A Reuters poll of around 50 analysts showed a median forecast for the dollar at $US0.9190 in six months and $US0.9000 by year end”.
    • The dry decade 2000-2009
    • But 2010 promises an improvement A dramatic turnaround in the season since November Excellent falls during February…especially in Queensland and NSW
    • Rain has boosted prices…but only back to average levels A¢/kg cwt 400 2009-10 ave 98-03 ave 03-08 2008-09 350 300 250 J A S O N D J F Source: MLA's NLRS
    • Cattle and beef supply
    • Cattle herd to commence slow rise from 2011 Beef production to fall 4% in 2010, before slowly rising production (million head) herd (million head) 2.5 30 2.3 2.1 25 1.9 1.7 20 1.5 1.3 15 00 01 02 03 04 05 06 07 08 09p 10f 11f 12f 13f 14f as at 30 June p = preliminary Source: ABS, MLA forecasts f = forecasts
    • Cattle herd continues to move north million head 18 Qld, NT & WA NSW, Vic, SA & Tas 16 14 forecast 12 10 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09p 10f 11f 12f 13f 14f census census As at 30 June, as at 31 March up until 1999 p = preliminary f = forecasts
    • Australian adult cattle slaughter down 4.5% million head 9 8 7 6 5 90 92 94 96 98 00 02 04 06 08 10f 12f 14f Source: ABS, MLA forecasts f = forecast
    • Australian cattle turnoff in 2010 million head 5 male cattle female cattle live export 4 3 forecast 2 1 0 90 92 94 96 98 00 02 04 06 08 10f 12f 14f Source: ABS, MLA forecasts f = forecasts
    • Beef and cattle demand
    • Economic growth for key countries year-on-year % change 15 2009 2010f 2011f 10 5 0 -5 -10 World US EU Japan UK Russia China India ASEAN-5 Source: International Monetary Fund, World Economic Update - Jan 2010 f = forecast
    • A$ against US$ and Japanese yen A$/US$ A$/Yen 1.1 110 A$/US$ A$/Yen 1 100 0.9 90 0.8 80 0.7 70 0.6 60 0.5 50 0.4 40 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Source: RBA
    • Beef exports and percentage of production '000 tonnes swt % of production 1,200 70 exports 1,000 % production 65 800 600 60 400 55 200 0 50 90 92 94 96 98 00 02 04 06 08 10f 12f 14f Source: DAFF, ABS, MLA forecasts f = forecasts
    • Australian beef exports to Japan '000 tonnes swt A$ billion 500 2.5 exports value 400 2 300 1.5 200 1 100 0.5 0 0 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10f Source: DAFF volume, ABS value, MLA forecasts f = forecast
    • Australian beef exports to Korea '000 tonnes swt A$ million 160 1000 exports value 140 800 120 100 600 80 60 400 40 200 20 0 0 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10f Source: DAFF volume, ABS value, MLA forecasts f = forecast
    • Korean beef imports '000 tonnes swt 350 Australia US other 300 250 200 150 100 50 0 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10f Source: KOTIS, MLA estimates f = forecast
    • Australian beef exports to US '000 tonnes swt A$ billion 500 2 exports value 400 1.5 300 1 200 0.5 100 0 0 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10f Source: DAFF volume, ABS value, MLA forecasts f = forecast
    • US annual Choice retail beef demand index index (1980=100) 100 90 80 70 60 50 40 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 Source: James Mintert, Purdue University
    • US cattle herd million head 120 110 100 90 80 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 As at 1 January Source: USDA, CattleFax
    • Australian beef exports to Indonesia '000 tonnes swt A$ million 60 200 volume value 50 150 40 30 100 20 50 10 0 0 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10f Source: DAFF volume, ABS value, MLA f = forecast
    • Australian beef exports to the EU '000 tonnes swt A$ million 14 160 volume value 12 140 120 10 100 8 80 6 60 4 40 2 20 0 0 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10f Source: DAFF volume, MLA f = forecast
    • Australian beef exports to Middle East '000 tonnes swt 20 15 10 5 0 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10f Source: DAFF, MLA f = forecast
    • Beef consumption and retail price '000 tonnes cwt A¢/kg 800 1,800 beef retail price beef consumption 750 1,600 700 1,400 650 1,200 600 1,000 550 800 500 600 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10f 11f 12f 13f 14f Source: MLA from ABS production and DAFF trade data, ABARE f = forecasts
    • Consumer expenditure on beef A$ billion 8 7 6 5 4 3 2 1 0 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 Source: MLA estimates from ABS production & trade data
    • Australian live cattle exports and value '000 head $A million 1,200 700 numbers value 1,000 600 500 800 400 600 300 400 200 200 100 0 0 90 92 94 96 98 00 02 04 06 08 10f 12f 14f Source: ABS, MLA forecasts f = forecasts
    • Live cattle exports and value to Indonesia '000 head $A million 1,000 500 numbers value 800 400 600 300 400 200 200 100 0 0 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10f Source: ABS, MLA forecasts f = forecasts
    • Live cattle exports to other destinations '000 head 800 700 Philippines Malaysia 600 China Japan 500 Middle East 400 & Africa Other 300 200 100 0 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10f Source: ABS, MLA forecasts f = forecast
    • Summary “There are tentative signs for a sustained recovery in beef and cattle prices for 2010, with better seasonal conditions and export demand, but the high A$ remains a major constraint upon the industry” 2011 and beyond: • Beef profitability to recover, underpinned by lower A$ and higher global beef demand • Australian cattle herd to reach 28 million head by 2014 • Global economic recovery to gather pace, fuelling beef demand – exports to exceed 1 million tonnes swt by 2014 • Live cattle demand to expand, fuelling herd expansion in the north
    • Questions?
    • The tale of two meats: 2009 Beef Lamb • Cattle price -5% +13% • Export value -$529m +$162m -12% +18% • Domestic value +$173m +$208m +3% +10%
    • Beef: what’s gone wrong? Lamb: what’s gone right? • Global credit crisis • Little impact of credit crisis • Global recession • Market spread & ‘treat’ status protects from recession • Fall in Australian consumer • Australian’s “love affair” with lamb spending continues to boost demand • A$ rise – all the cost born by • A$ rise largely passed on to customers exporters & producers due to global shortage • US return to Japan & Korea • Big fall in competition from NZ & further • Higher US cow beef supply falls in US supply • Russia fall lifts competition from South America elsewhere • Fall in hide & other co-product • Less severe fall in skin & other co- value product value • Supply fall • Supply rises