Challenging year ahead for Aussie beef

Beef growers will face a difficult year in 2021, industry specialist Rabobank predicts

Rabobank predicts Australian cattle growers will face a challenging 2021

Experts from Australia’s beef industry have proclaimed a ‘once in a generation opportunity’ for the sector amidst a plethora of challenges including the lowest breeding cattle inventory in three decades.

Agribusiness banking specialist Rabobank released its seasonal outlook last week, outlining both the challenges faced by the beef industry, as well as the opportunities to shape its future as it aims to respond from a historically difficult 2020.

“A number of challenges currently confront the Australian beef industry,” the report outlines.

Leading the sector’s challenges is the limited cattle supplies, underpinned by Australia’s scarce existing stock and low breeding numbers, which have led to a drop in slaughter numbers, beef exports and live exports.

Rabobank predicts the 2021 Australian cattle slaughter is set to be 6.7million head, a decrease of six per cent from 2020.

Beef exports are also expected to be down by five per cent, despite improved economic conditions in a recovering food service sector which was mostly disrupted following the outbreak of COVID-19 one year ago.

Live exports are also set to be constrained due to higher prices and a reduced cattle population.

But given the challenging landscape the country’s beef industry currently finds itself in, many are highlighting the opportunity to reassess and reevaluate the direction the industry should be heading in in the future.

“Australia’s position in the global protein world needs to be considered in rebuilding the heard,” the report says.

“Are we going to be a supplier intro high-quality niche markets, a commodity supplier of lean beef to global trade, an exporter of live cattle or exporter of value-added beef to trade markets?”

Rabobank’s report suggests results for 2021 year will be dictated by limited cattle supplies, which while causing an inflated price for cattle, has also challenged capital efficiency, meaning the many feedlots running below capacity will struggle to recover throughout the coming year.

Rabobank senior animal proteins analyst Angus Gidley-Baird

With cattle stock around the country at its lowest levels in around 30 years, re-stocking the national herd would come at a premium given the heightened price of cattle – a dilemma Rabobank senior animal proteins analyst, Angus Gidley-Baird, says is a significant problem and one of many decisions facing beef farmers.

“Decisions taken this year are not just about whether to restock at high prices, but also about which genetics, productions system attributes, feeding regimes, supply chains and end customers are needed to build a sustainable basis for the businesses in the future,” Gidley-Baird says.

“Such a chain of events has led to, we believe, some of our lowest breeder numbers in decades and, as a result, low slaughter numbers this year and a big rebuild process over the coming years.”

Favourable seasonal conditions are expected to serve as some reprieve for the industry, with cattle prices easing throughout the year as some of the urgency of producer restocking demand recede.

Throughout Australia, beef consumption is forecast to remain steady this year following a 12 per cent decrease per capita over the past two years as the popularity of low protein trends continues to rise.

However, the plateauing of domestic beef consumption “will not be enough to offset lower production volumes,” the report says, which according to Gidley-Baird, will see export volumes drop five per cent.

Globally, the high price and low beef inventory have meant beef and live exports have too been challenging, not least given the ongoing trade tensions with China.

The China market is set for a large decline in export volume however the Australia beef sector is set to be rebuffed by the established markets of Japan, South Korea and the United States, which have all remained steady.

“Japanese and South Korean markets have remained relatively steady through 2020 and these long-standing markets are expected to maintain import volumes of Australian beef in 2021, although we will face strong competition from the US, which is anticipated to increase exports through the course of 2021,” Gidley-Baird says.

Live exports to Indonesia, which fell 31 per cent in 2020, are set to recover slightly throughout the year while demand from Vietnam, which imported 11 per cent more beef last year, is set to regress as the nation’s protein shortage dissolves.

“As global economic conditions improve and food service trade opens up, we hold a positive view on demand for grain-fed beef,” says Gidley-Baird, who suggests the market for feedlots looks optimistic despite the US’ growing global footprint for grain-fed beef.