Highlights

Australian cattle numbers are forecast to rebound in 2017 to 28.8 million head due to an improved seasonal outlook and herd rebuilding. Pasture growth across Australia has encouraged a decline in slaughter rates although seasonal conditions vary by region. Low grain prices have lowered the cost of finishing cattle and boosted average weights. Nevertheless, beef and veal production is expected to decline to 2.04 million MT, and beef and veal exports are forecast at 1.35 million MT. Live cattle exports are forecast to fall to 0.8 million head due to supply constraints and lower demand. Post expects pig meat production at 0.395 million MT in 2017.

EXECUTIVE SUMMARY

Improved seasonal conditions in 2017 are expected to support the recovery of the beef cattle herd across eastern Australia. Improved pasture growth has encouraged stock retention. Slaughter numbers have declined from the high level of previous years when drought conditions prevailed. Herd expansion is likely to be centered in Victoria and New South Wales (NSW), but recent forecasts for wetter conditions in northern Australia could help boost cattle numbers in Queensland and the rest of the region as well.

The Australian cattle herd is forecast by Post to increase to 28.8 million head in 2017, because of the slowdown in female slaughter rates, improved pasture growth, and the lower cost of feed grain. This trend is already evident in stronger restocker demand for breeder cattle at saleyard auctions and in the partial closure of a number of processing facilities. Post forecasts total cattle slaughter at 7.5 million head for 2017, as improved seasonal conditions and herd rebuilding limit the overall supply of cattle. Post expects cow slaughter to slow in 2017 to 3.2 million head (43 percent of total slaughter) as female stock is retained.

Australian beef and veal production in 2017 is forecast by Post to decline to 2.04 million MT, almost the same as the official forecast. This reflects the forecast decline in the slaughter rate, which is slightly offset by higher carcass weights. Another factor is the cost of new stock of feeder cattle, with high prices being recorded in recent auctions. Per capita beef consumption in Australia is expected to be stable in 2017. The number of grain-fed cattle in feedlots is expected to fall over the year due to greater pasture availability and despite low grain prices.

Australian beef exports are expected to be limited by tighter market supplies and the strength of the Australian dollar. Post forecasts that beef exports will decline slightly to 1.35 million MT in 2017, slightly above the official estimate due to increasing carcass weights. Beef exports to the United States and Japan are likely to fall in 2017 due to increased competition and the impact on competitiveness of the stronger Australian dollar. Exports of live cattle are expected to fall to 0.8 million in 2017 due to high domestic cattle prices, the rising Australian dollar, and changing import regulations in a number of major markets.

In 2017, the Australian pig herd is forecast to increase slightly to 2.27 million head while pig slaughter for the year is forecast by Post at 5.1 million, the highest in eight years, from an estimated sow herd of around 275,000. Post expects Australian pig meat production in 2017 to reach 0.395 million MT, the same as the official forecast. Average weights are expected to increase slightly due to the abundance of lower cost feed. Post forecasts Australian pig meat exports at 36,000 MT in 2017, the same as in the previous year. Imports of pig meat are expected to be stable at 210,000 MT.

SEASONAL OUTLOOK

In Australia, variations in seasonal conditions have a significant impact on the livestock industry as the beef and dairy cattle herds are predominantly grass-fed and pasture availability limits carrying capacity. Over the three years to mid-2016, drought conditions affected a third of beef cattle farms across Australia and contributed to high cattle turn-off (slaughter and live cattle exports) as farmers faced feed shortages while export markets offered high prices.

In 2017, improved seasonal conditions appear likely to support the recovery of the beef cattle herd across eastern Australia, and the slaughter rate has fallen significantly as breeding stock is increasingly retained. Herd expansion is likely to take place mainly in Victoria and NSW which have received good rainfall and pasture growth. However, the Bureau of Meteorology’s (BOM) latest rainfall outlook points to below average rainfall for most eastern and central parts of Australia for the three month period to May.

Similarly, the outlook for northern Australia is still uncertain as record high temperatures were recorded in February 2017 across the cattle regions of Queensland, but a wetter than average three month period to May is now forecast by the BOM. On the positive side, widespread winter and spring rains have contributed to increased dam storage levels throughout southern Australia; with the Dartmouth, Hume and Eildon dams at over 75 percent of capacity in February 2017, compared to below 50 percent at the same time in 2016.

The forecasts for Australian livestock assume average seasonal conditions will prevail, especially across eastern Australia. While the latest BOM projections warn of ‘below average’ rainfall and ‘above average’ temperatures across some cattle producing regions, good conditions, especially in Victoria and NSW, are likely to underpin cattle herd recovery in 2017.

CATTLE

Cattle Numbers

The Australian cattle herd is forecast by Post to increase to 28.8 million head in 2017, slightly above the official forecast because of a significant slowdown in female slaughter rates and the falling cost of feed grain across the country. After several years of high turnoff, strong restocker demand in many southern markets indicates that herd rebuilding has finally commenced. There have also been partial closures of processing facilities around Australia due to a shortage of cattle. Re-stockers have been increasing their share of sale yard turnover, to take advantage of available pasture and rebuild their herds.

The Post forecast for strengthening cattle numbers over 2017 assumes average seasonal conditions in the second half of the year. It should be noted that official statistics of cattle herd numbers based on survey data are considered less reliable than statistics collected by a census. Results from a 5-yearly comprehensive census on cattle numbers by the Australian Bureau of Statistics are expected to be available after March 2017.

Cattle Slaughter

Post forecasts that cattle slaughter in 2017 will continue to fall to 7.5 million head, as improved seasonal conditions and herd rebuilding limit the overall supply of cattle. Both 2014 and 2015 were record years for adult cattle turn-off, followed by a fall in slaughter numbers over 2016. This was influenced by widespread rain across many cattle producing areas from mid-2016, which encouraged re-stocking by the industry. The forecast for total slaughter is very similar to the official forecast, although Post estimates that cow and calf slaughter will be slightly lower, as herd numbers are rebuilt and stock is withheld to take advantage of better pasture availability, especially in NSW and Victoria. In Queensland and northern Australia, seasonal conditions are less favorable, but herd rebuilding also appears to be a priority based on recent sale yard auctions. The Post forecast for calf slaughter is slightly below the official forecast as a result of these conditions.

Post expects cow slaughter in 2017 to slow to 3.2 million head (43 percent of total slaughter) as female stock is retained. This forecast is similar to the official forecast and is supported by a decline of almost 20 percent in early 2017 slaughter numbers for adult cattle in the eastern states, which were the lowest since 2012. The Queensland re-stocker yearling steer indicator increased sharply in early 2017, above the price for feeder yearling steers and those sold to processors. Normally, the average price paid by these buying groups is very close, but the premium paid by restockers was almost at an all-time high.

Production

Australian beef and veal production in 2017 is forecast by Post to decline to 2.04 million MT, almost the same as the official forecast. This reflects the forecast decline in the slaughter rate, which is slightly offset by higher carcass weights due to improved seasonal conditions and lower grain prices.

Post has slightly increased the estimate for beef production in 2016 based on recent statistics. Over 2016, beef production in Australia was affected by seasonal conditions and fell by over 15 percent in the leading states of Queensland and NSW. In Victoria, beef production fell over 20 percent, partly due to increased slaughter of dairy cows in response to very low milk prices. However, carcass weights increased in most states by around 3-5 percent, reflecting good pasture conditions over the second half of the year, as well as low grain prices.

The number of grain-fed cattle in feedlots is expected to decline over 2017 due to greater pasture availability and despite low grain prices. The high cost of new stock of feeder cattle in recent auctions has led to a reduced number of stock entering feedlots. Cattle tend to be finished for longer periods in these facilities because of the lower cost of feed. This trend is expected to contribute to higher average weights. Over 2016, cattle in feedlots reached almost one million head per quarter, but better seasonal conditions and pasture growth from mid-2016 suggest these numbers will fall to around 700,000 per quarter over 2017.

Consumption

Post forecast per capita beef consumption in Australia remains flat in 2017. Beef has lost competitiveness with chicken and pork meat and was over two and a half times more expensive per kilogram than chicken meat in late 2016. In addition, the gap in retail prices between beef and lamb on the domestic market is increasing while consumption of pork is increasing on a per capita basis.

The beef industry has sought to promote beef as a healthy food and to increase consumer acceptance of secondary cuts of beef as a means of offsetting high retail prices. The winter advertising campaign ‘You’re Better on Beef’ ran to July 2016, and subsequent campaigns emphasized the importance of red meat as a source of dietary iron. One initiative was to provide a red meat alternative to roast chickens in supermarkets, and pre-cooked hot beef was sold in supermarket chains from mid-2016.

Trade

In 2017, Australian beef exports are expected to be limited by tighter market supplies and lower international demand due to the strength of the Australian dollar. Post forecasts that beef exports will consequently decline slightly to 1.35 million MT in 2017.

Beef exports to the United States in 2017 are forecast by Post to fall to 320,000 MT, or around one third. This is expected because of supply constraints in Australia, the higher Australian dollar and greater competition from other suppliers to this market.

In 2016, Japan resumed its position as Australia’s largest beef market, followed by the United States.

Around 70 percent of Australian beef exports to the US market are manufacturing beef, which are used in ground beef products or for further processing. Australia’s access to the US market is limited by a volume quota of 423,214 MT in 2017 with a tariff of 17.6 percent above this quota.

Post expects Australian beef exports to Japan to be 320,000 MT in 2017, 14 percent below the previous year. Australian beef appears to have lost competitiveness in this market, especially against US beef exports, due to high beef prices in Australia and the strength of the Australian dollar. This loss of competitiveness is expected to be somewhat offset by falling tariffs on Australian beef exports under the Japan-Australia Economic Partnership Agreement (JAEPA). From April 1, 2017, Australian beef exports to Japan will have a tariff of 30 percent, compared to 38.5 percent for US exporters to Japan. Frozen beef exports to Japan have a tariff of 27.2 percent, compared to 38.5 percent for US frozen beef exports.

Australian beef exports to China are forecast by Post to decline to ABARES to around 130,000 MT, a fall of around 25 percent because of increased competition in that market. The ChAFTA agreement gives Australian exporters of beef a tariff of 8.4 percent in 2017 (9.6% in 2016), compared to 12 percent for US exporters. Tariffs on beef imports from Australia which previously ranged from 12-25 percent will be eliminated in seven years. In the Korean market, Australian exporters will pay a tariff of 29.3 percent on chilled beef, compared to a tariff of 24 percent for US exporters, which have benefited from an earlier bilateral FTA.

Live Cattle Exports

In 2016, Australia exported over 1 million live cattle to almost twenty countries. For 2017, Post has forecast that live cattle exports will decline to 0.8 million head. This trend is explained by high domestic cattle prices, the rising Australian dollar, as well as increased competition and changing import regulations in a number of major markets. Demand from Indonesia is expected to decline in response to an influx of comparatively lower cost Indian frozen buffalo meat into this market.

There is some uncertainty over the extent of Australian live cattle exports to Indonesia in 2017. Previously, these exports from northern Australia were regulated by import permits, but the quarterly allocation system was eliminated in late 2016. Importers now need to import one breeder for every five feeder cattle to receive a permit, and there have been bilateral discussions on this issue.

In 2017, the Indonesia-Australia Commercial Cattle Breeding Program is expected to supply 2,000 breeding heifers and 100 bulls from Australia, as part of the Indonesia-Australia Partnership on Food Security in the Red Meat and Cattle Sector. Post notes that negotiations towards a free trade agreement between Australia and Indonesia are proceeding, and that lower barriers for live cattle exports are a likely outcome of these talks, possibly from 2018.

Australia is the only country to have negotiated access for live feeder and slaughter cattle to China. This trade was facilitated under the Australian feeder and slaughter cattle import health protocol agreed with the Chinese Government on August 13 2015. The first shipment of slaughter cattle arrived in China by sea in early 2017.

Under the China-Australia Free Trade Agreement (ChAFTA), the previous 10 percent tariff for live cattle exports to China decreased to 4 percent from January 1 2017 and the tariff will be removed on January 1 2019. However, the live cattle trade to China is comparatively high cost for the companies involved and may expand slowly.

MY

Jan 2015

Jan 2016

Jan 2017

Australia

Animal Numbers, Cattle

USDA

Official

New

USDA

Official

New

Post

USDA

Official

New

Post

Total Cattle Beginning Stocks

29,102

29,102

27,413

27,413

27,75

27,693

Dairy Cows Beginning Stocks

1,689

1,689

1,7

1,7

1,69

1,69

Beef Cows Beginning Stocks

12,532

12,532

12,5

12,5

12,7

12,7

Production (Calf Crop)

9,394

9,394

9,35

9,35

9,475

9,5

Total Imports

0

0

0

0

0

0

Total Supply

38,496

38,496

36,763

36,763

37,225

37,193

Total Exports

1,336

1,336

1,125

1,152

1

800

Cow Slaughter

4,45

4,45

3,4

3,428

3,225

3,2

Calf Slaughter

667

667

550

542

525

500

Other Slaughter

4,557

4,557

3,85

3,86

3,775

3,8

Total Slaughter

9,674

9,674

7,8

7,83

7,525

7,5

Loss

73

73

88

88

75

75

Ending Inventories

27,413

27,413

27,75

27,693

28,625

28,818

Total Distribution

38,496

38,496

36,763

36,763

37,225

37,193

Meat, Beef and Veal

2015

2016

2017

Market Begin Year

Jan 2015

Jan 2016

Jan 2017

Australia

USDA

Official

New

Post

USDA

Official

New

Post

USDA

Official

New

Post

Slaughter (Reference)

9,674

9,674

7,8

7,83

7,525

7,5

Beginning Stocks

55

55

26

26

12

12

Production

2,547

2,547

2,075

2,125

2,015

2,04

Total Imports

13

13

13

13

13

13

Total Supply

2,615

2,615

2,114

2,164

2,04

2,065

Total Exports

1,854

1.854

1,385

1,435

1,325

1,35

Human Domestic

Consumption

735

735

717

717

705

705

Other Use, Losses

0

0

0

0

0

0

Total Domestic

735

735

717

717

705

705

Ending Stocks

26

26

12

12

10

10

Total Distribution

2,615

2,615

2,114

2,164

2,04

2,065

Pig Numbers

Post forecasts the size of the Australian pig herd to increase slightly to 2.27 million head in 2017. Post expects Australian pig production to reach 5.15 million head in 2017. In recent years there has been an increase in pig numbers in Queensland and South Australia, which account for about half the national herd. This increase has occurred in response to both higher domestic demand, higher prices for pigmeat, and significantly lower feed prices because of the record winter crop harvest in Australia.

The Australian pig industry is dominated by large-scale piggeries, with relatively few midsized farm operations, but a larger number of smaller farms. Over the past five years, the number of enterprises in the industry has declined, with growing pig production being increasingly farmed by fewer operators. One of the major pigmeat producers in Australia is a Singapore-owned vertically-integrated company that primarily generates revenue through pig production, processing and wholesaling. The company also produces stock feed and is involved in grain production. Outside of the larger players, pig farming is highly fragmented.

There are a number of regulatory barriers that impede the development of new large-scale piggeries in Australia. In early 2017, a proposed 25,000-animal intensive piggery in south-west NSW was reportedly rejected by the NSW environmental protection agency due to the risk of pollution near the proposed site. The piggery was also linked with a proposed A$40 million pork processing facility in the region which is now on hold.

Slaughter

Pig slaughter for 2017 is forecast by Post at 5.1 million, from an estimated sow herd of around 275,000. This is the highest slaughter number in eight years.

Pig Meat Production

Post expects Australian pig meat production in 2017 to reach 0.395 million MT, the same as the official forecast. Average weights are expected to increase slightly due to the abundance of lower cost feed, which is the main input in commercial pig production. Pigs are primarily classified as porkers or baconers. Porkers are used for fresh meat products like pork chops, while baconers are processed into bacon, ham and smallgoods. Pigs are fed on mostly grain-based diets. The domestic pork industry has increasingly focused on growing sales of fresh meat, which faces less competition from imports.

Consumption

Post forecasts gradually increasing domestic consumption of pork, reflecting its greater price competitiveness against beef and the impact of industry marketing campaigns. Consumption is expected to increase to 0.575 million MT in 2017, the same as the official forecast. Domestic consumption of fresh pork on a per capita basis has increased gradually due to industry marketing campaigns and the price advantage of pork compared to beef and lamb, despite gradual price rises for pig meat over the past 5 years. Australians consume around 25 kg of pork per person annually, made up of 10 kg of fresh pork and 15 kg of processed ham products which are typically frozen.

Pork products account for around 10 percent of total fresh meat retail consumption. Around one quarter of pig meat is sold through restaurants and other domestic food service outlets. Fresh pork sold in Australia is domestically produced while around two thirds of processed pork products (ham, bacon and small goods products) are made from frozen boneless pork imported from Denmark, Canada, the Netherlands and the United States. Consumption of pigmeat peaks during Christmas but is stable over the rest of the year.

Domestic industry marketing campaigns such as ‘get some pork on your fork’ have helped to maintain pig meat consumption in recent years. Retailers are fresh pork industry’s largest market, and this sector is dominated by major supermarkets, such as Coles, Woolworths and ALDI. Butchers tend to purchase fresh pork, while smaller food retailers typically buy cured meats and small goods. Major supermarkets contract with pig meat processors. Fresh pork sales to food-service establishments such as hotels and restaurants have increased, but food manufacturers tend to import lower-cost pig meat from Canada, Denmark, the United States and other countries.

Trade

Post forecasts Australian pig meat exports at 36,000 MT in 2017, the same as in the previous year and slightly above the official forecast for the current year. Australia typically exports pork to a range of markets including Singapore, Hong Kong and New Zealand. At least half of these exports are made on an intra-company basis; from subsidiary to parent company. The largest Australian pig farm exports around one third of its production, mainly to Singapore and Japan.

Quarantine regulations do not allow the importation of live pigs or genetic material. Post forecasts imports of pig meat in 2017 at 210,000 MT, the same as the official forecast and around the same as the previous year. Imported pig meat which has been heat-treated in government accredited facilities in Australia can be used to make ham and bacon products. Imports are typically boneless legs of pork, which are then cooked and cured and made into ham, as well as boneless middle portions which are cooked and cured into bacon.

Animal Numbers Swine


Animal Numbers Swine,

2015

2016

2017

Market Begin Year

Australia

Jan 2015

Jan 2016

Jan 2017

USDA

Official

New

Post

USDA

Official

New

Post

USDA

Official

New

Post

Total Beginning Stocks

2,308

2,308

2,272

2,272

0

2,22

Sow Beginning Stocks

271

271

270

270

0

275

Production (Pig Crop)

4,921

4,921

5,028

5,028

0

5,15

Total Imports

0

0

0

0

0

0

Total Supply

7,229

7,229

7,3

7,3

0

7,37

Total Exports

0

0

0

0

0

0

Sow Slaughter

0

0

0

0

0

0

Other Slaughter

4,957

4,957

5,04

5,08

0

5,1

Total Slaughter

4,957

4,957

5,04

5,08

0

5,1

Loss

0

0

0

0

0

0

Ending Inventories

2,272

2,272

2,26

2,22

0

2,27

Total Distribution

7,229

7,229

7,3

7,3

0

7,37

Meat Swine

2015

2016

2017

Market Begin Year

Jan 2015

Jan 2016

Jan 2017

Australia

USDA

Official

New

Post

USDA

Official

New

Post

USDA

Official

New

Post

Slaughter (Reference)

4,957

4,957

5,04

5,08

5,165

5,1

Beginning Stocks

25

25

21

21

26

22

Production

374

374

385

386

395

395

Total Imports

220

220

215

211

210

210

Total Supply

619

619

621

618

631

627

Total Exports

36

36

35

36

35

36

Human Domestic Consumption

562

562

560

560

575

575

Other Use, Losses

0

0

0

0

0

0

Total Domestic

562

562

560

560

575

575

Ending Stocks

21

21

26

22

21

16

Total Distribution

619

619

621

618

631

627