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

1. 2010 Cattle and Beef Industry Projections
18th February, 2010
Tim McRae, Economist, Meat & Livestock Australia

2. 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)

3. 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

4. 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”.

5. The dry decade 2000-2009

6. But 2010 promises an improvement
A dramatic
turnaround in the
season since
November
Excellent falls during
February…especially
in Queensland and
NSW

7. 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

8. Cattle and beef supply

9. 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

10. 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

11. 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

12. 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

13. Beef and cattle demand

14. 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

15. 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

16. 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

17. 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

18. 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

19. 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

20. 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

21. 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

22. 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

23. 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

24. 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

25. 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

26. 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

27. 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

28. 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

29. 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

30. 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

31. 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

32. Questions?

33. The tale of two meats: 2009
Beef Lamb
• Cattle price -5% +13%
• Export value -$529m +$162m
-12% +18%
• Domestic value +$173m +$208m
+3% +10%

34. 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