Australia’s live cattle export trade has been pegged to drop 16 per cent this financial year as record prices force buyers in key South East Asian markets, including Indonesia, to seek cheaper alternatives.
The gloomy forecast, contained in the Australian Bureau of Agricultural and Resource Economics and Sciences’ new March quarter outlook, has cattle exports set to peak at 649,000 head by the end of 2021-22 — the lowest figure in a decade.
It comes after abattoir operators and traders in Australia’s biggest market, Indonesia, went on strike protesting the high price of cattle and beef supplies.
The strike by Indonesian Meat Slaughter and Traders Network members lasted from February 28 to March 4, leaving usually bustling wet markets in the Greater Jakarta area deserted.
In response, the Indonesian Government increased the allocation of permits for Indian buffalo meat imports and encouraged the private sector and state-owned enterprises to engage in new beef production initiatives, from the village smallholder level to corporate palm oil plantations.
According to ABARES, strong domestic prices and limited availability have simply made live cattle too expensive for some importers.
“Additionally, pandemic–related economic slowdowns in key South-East Asian markets reduced incomes and meant less consumers were buying beef from Australian live cattle,” the report said.
“A weak start to the financial year has been somewhat offset by higher exports in December and January, as live cattle importers secure cattle in preparation for the Ramadan and Eid periods.
“Despite this spike, high prices and limited cattle availability are expected to continue keeping live export volumes low for 2021–22.”
Indonesia accounts for about half of all live cattle exports from Australia, nearly all of which end up in feedlots.
Australia exported about 409,000 head of live cattle to Indonesia last year, down from 465,000 in 2020.
The Northern Territory accounted for nearly 237,000 head of live cattle exports to Indonesia last year, followed by WA (102,000) and Queensland (70,300).
Total Australian live cattle exports in 2021 numbered about 788,000 head, about 30 per cent lower than in 2020.
Vietnam is the second-biggest importer of live Australian cattle, averaging about 20 percent of the market in recent years.
It is not just ABARES predicting slow times ahead for the trade, with the US Department of Agriculture’s Livestock and Products Semi-Annual report offering a similar forecast.
“With Australia in the early stages of a herd rebuild and at a point where cattle slaughter in 2022 is expected to be still at its second-lowest in nearly 40 years, there are no significant triggers anticipated in domestic circumstances that could result in a sharp decline in beef cattle prices,” report author Zeljko Biki said.
“Combined with an expectation of ongoing strong world demand for beef during 2022, there looks to be little scope for any significant decline in live cattle export prices that could then drive any increased trade volumes of live cattle to the major destinations of Indonesia and Vietnam.”
Despite the national herd rebuild, tight supply and high prices would continue to “challenge the economic feasibility” of Australia’s main export customers, according to the USDA.
“Industry sources indicate that available stock for the live trade were depleted in 2021 and… the northern parts of Queensland and the Northern Territory are a little further behind in their herd rebuilding phase,” Mr Biki said.
“This is limiting the available supply of livestock for the trade in 2022.
“The price for live export cattle in early 2022 is around 25 percent higher from what were already considered high prices in the early months of 2021.
“These prices have been driven up by the demand from restockers and feedlots since early 2020, which has seen domestic cattle prices rise by well over 100 percent over the last two years and the Eastern Young Cattle Indicator continuing to break records.”
Australian cattle typically remain in Indonesian feedlots for about 100 days, providing scope to average down their cost with low-cost feed.
However, Mr Biki said there had been reports that food processors had been able to increase their extraction rates, leaving fewer and less nutritionally valuable by-products for feedlots.
“With this, overall feed costs have also been increasing for Indonesian feedlots,” he explained.
“The combination of very high live cattle prices and elevated feed costs is expected to result in a significant decline in live cattle exports to Indonesia in 2022, from the already reduced level of 2021.”