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Good morning ladies and gentlemen.
In my presentation this morning I will be
providing you an overview of ABARES' outlook for the
main meat commodities.
In doing so I will spend most time on beef and
sheep meat but I'll also be touching on the outlook
for poultry and pig meat.
First I would like to turn to the outlook for beef,
starting with the outlook for the average saleyard price.
The nominal average saleyard price for beef
cattle is forecast to increase by 2% this year
reflecting continued restock demand for young
cattle and low turnoff.
Next year, saleyard prices are expected to remain
relatively strong before trending down in real
terms out to the end of the projection period.
Prices are projected to fall in response to
increased supply of cattle and lower returns on
average for exporters.
Now I will discuss in a little more detail the
main supply-side factors affecting this outlook.
For some time now, we have been writing about herd
rebuilding in our quarterly commodity
outlooks for beef.
The last two seasons have been very good for pasture
growth and allowing producers to carry more stock.
The ABARES has estimated that beef cattle numbers
rose by 9% last year to just over 26 million head.
Given favourable seasonal conditions, Australia's
beef cattle herd is projected to expand to
just over 29 million head over the next two years
which would make it the largest herd for nearly 30 years.
After this, herd numbers are expected to decline
gradually as slaughter increases.
In the short term, as herd rebuilding continues,
slaughter is forecast to remain at around eight million
head, which is lower than the average recorded over
the past 10 years.
Over the medium term, cattle slaughter is
projected to increase as herd rebuilding abates and
in response to growing demand in export markets.
With these expected levels of slaughter and a high
proportion of adult males in the turnoff lifting
average carcass weights, beef production is
forecast to increase by 1% this year and a further 2%
next year.
Over the medium term, production growth is
expected to be slowed somewhat by an increase in
the proportion of females in the slaughter.
This pattern of production is consistent with the
abatement of herd rebuilding and producers
turning off surplus breeding stock.
As many of you would know on the demand side nearly
two-thirds of Australian beef production is exported.
As such export markets are important drivers of the
beef industry.
The volume of beef exports is forecast to increase by
2% next year and be mainly responsible for a similar
increase in beef export earnings.
Over the medium term Australian beef exports
are projected to increase moderately to just over
one million tonnes.
Perhaps a more interesting export story is the
changing composition of export destinations for
Australian beef.
Ten years ago just over 80% of Australian beef
exports found their way to the United States,
Japan and the Republic of Korea.
This year later rose to 92% but by the end of this
year is expected to have fallen to around 68%.
Over the outlook period there are no signs that
this change is likely to be reversed with the
performance of our exports in these three markets
forecast to be mixed.
In Japan, Australian beef is expecte--In Japan
demand for Australian beef is expected to fall as a
result of stationary per person beef consumption
and increasing competition from U.S. beef.
In the Republic of Korea, growing beef consumption
and reduced domestic supplies--because of an
outbreak of foot-and-mouth disease in 2011--are
expected to increase Korean demand for beef
imports from Australia in 2011-12.
However these are expected to decline over the
remainder of the projection period.
On a brighter note, the lowest supply of domestic
beef available to U.S. consumers is expected to
drive a small recovery in U.S. beef imports.
However Australia does face increased competition
in that market from Canada and low-cost producers
from Latin America, particularly Mexico and Brazil.
By the end of the outlook period the share of
Australian beef exports going to these three
markets is projected to fall slightly to around 65%.
Before moving on to sheep meat, I just wanted to
touch on live cattle exports which are forecast
to fall by 31% this financial year.
This fall is largely due to Indonesia's intention
to reduce live cattle imports significantly in 2012.
Now I'll move on to the outlook for lamb and sheep
prices in Australia.
The nominal average saleyard price for lambs
is forecast to increase marginally next year
reflecting demand from producers rebooting flocks
and also from exporters.
Although the supply of lambs is projected to
increase over the projection period the
average saleyard price is forecast to remain
favourable in real terms despite being projected to fall.
In the case of sheep, the nominal average saleyard
price is forecast to increase by 3% next year.
This follows from an expected fall in the
supply of sheep as producers retain breeding
ewes for flock expansion and wethers for wool production.
Over the medium term sheep prices are expected to
remain favourable with strong demand from export
markets expected to balance the effects of a
projected increase in sheep turnoff.
We'll now take a look at the supply side influence on
this outlook in a little more detail.
After several years of decline, the Australian
sheep flock is forecast to increase over the next few
years and reach 85 million head by the end of the
outlook period.
Favourable returns are expected to drive the
expansion albeit at a slowing rate.
Over the outlook period the slaughter of lambs and
adult sheep is forecast to increase and support
higher sheep meat production.
Lamb production is expected to be boosted by
an increasing supply of lambs and strong demand in
export markets.
Production is also expected to be boosted by
a greater focus by many producers on improving
genetics and finishing lambs on grain which is
expected to lead to higher average carcass weights.
Mutton production is expected to increase
sharply early in the projection period
following the turnoff of old ewes held in previous
seasons to increase lamb numbers.
Production is also expected to be boosted by
very good pasture conditions contributing to
higher average carcass weights.
On the demand side, while a gradual increase in per
capita land consumption has been forecast for
Australia, most growth is expected to come from
export markets.
The volume of Australian lamb exports is forecast
to increase by 11% next year.
And coupled with favourable export prices
is expected to increase the value of Australian
lamb exports by 21%.
Over the medium term the volume of lamb exports is
projected to continue its upward trend.
The real value of lamb exports is projected to
increase over the next two years before easing over
the remainder of the outlook period as an
expected increase in supply puts downward
pressure on prices.
Export volumes to established markets are
projected to rise--particularly the United States.
At the same time, demand in developing markets such
as China and parts of the Middle East is projected
to strengthen as a result of growing incomes.
Turning now to mutton exports where the volume
is forecast to increase by 20% next year and
translate into a 25% increase in value.
The strong growth in value also reflects an
expectation of higher unit returns stemming from
strong demand in the Middle East and China.
At the end of the outlook period mutton exports are
projected to reach 140,000 tonnes with a
projected value of 645 million dollars.
Now I just want to touch on live sheep exports
which after falling to their lowest level on
record this year are forecast to increase by
36% next year to around three million head.
Over the remainder of the outlook period live sheep
exports are projected to increase as the pace of
flock rebuilding eases and the supply of sheep increases.
By the end of the outlook period these exports are
projected to reach almost four million head.
That's still well below the 20-year average to
2010-11 of around five million head.
We'll now move on to poultry and pig meat.
Australian poultry production is forecast to
increase by 2% next year to just over one million tonnes.
The expected increase in production is largely a
response to consumer demand.
Over the medium term production is projected to
increase by around 2% a year.
Productivity in the Australian poultry
industry has improved significantly over the
past decade where improved genetics has helped
improve fertility, food conversion rates and
average carcass weights.
In the 10 years to 2010-11, average chicken slaughter
weights increased by 19%.
This improvement is likely to continue over the
outlook period.
In the case of Australian pig meat, production is
forecast to increase by 1% next year.
Over the medium term pig meat production is
projected to increase gradually to 370,000
tonnes partly as a result of the lower feed-grain
costs and increased demand for pig meat.
These forecast increases in production combined
with the flow and effects of increased used of
inputs in the process sector are expected to
result in rural pig meat process declining.
Consequently, the weighted average price of pigs is
forecast to fall by 2% next year.
Over the remainder of the outlook period the price
is projected to fall to around 265ยข a kilogram.
In summary, ABARES is forecasting that the
saleyard price of beef cattle will decline in
real terms continuing a longer term trend.
However production and exports are projected to rise.
While the saleyard price of lambs and sheep are
also projected to fall in real terms over the
outlook period, prices are expected to remain at
historically favourable levels.
At the same time, production and exports
are projected to increase.
Lastly, production of both poultry and pig meat are
projected to increase over the outlook period.
Thank you.