Exporters who continue to exploit high prices could cause a downturn in the industry further down the track, a new report from ANZ has found.
The report, titled Cattle Call, recommends beef producers begin rebuilding herd numbers to meet growing international demand for beef, as drought conditions and current demand see herd numbers fall.
The current cattle herd size in Australia is at a two-decade low of 23.3 million, the report finds.
ANZ says a $7 billion growth in the industry is possible by 2025 if cattle numbers can be increased quickly.
ANZ’s head of agribusiness Mark Bennett says the long-term gain should be worth the short-term change.
“Australia’s beef industry finds itself at a critical crossroad that requires a call for serious consideration of some opportunity cost,” he says.
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“It’s a balancing act for Australia’s beef producers as they understandably look to capitalise on today’s market with the current high-price cycle, while also understanding that as an industry we could look for longer-term prosperity that comes from rebuilding a larger national herd that brings more valuable output for the longer-term.”
Key findings from Cattle Call:
- Keeping herd slaughter rates high in the short-term will provide immediate returns to farmers, however lower slaughter rates and herd building could be the difference between a $16.4 billion and $9 billion industry
- But if the beef industry continues on its current path it will be worth $11.8 billion with only 21.6 million head of cattle in 2025
- Australia’s beef cattle herd has declined from 26.5 million in 2013 to 23.3 million in 2016 due to drought conditions and high prices leading to high cattle turn-off rates
- Australia exported 84 per cent of its total beef and veal production in 2014-15
- Since 2011, Australian exports to the United States have increased significantly, and the US is now Australia’s largest and most valuable export market – worth over $3 billion in 2015
- Exports to China have increased rapidly since 2011 and are currently worth around $1 billion a year
- Australia is facing increased export competition to China, but Australian beef quality and safety gives it a significant advantage.
With 84 per cent of Australia’s total beef production being exported over the 2014-15 financial year, Bennett says being able to meet future demand is crucial.
“If we are to continue to supply and grow strong overseas markets, the key will be to ensure greater output and focus on value as well as adopting an increased focus on production, processing and trade productivity.”