Aus beef: lots at steak

There is good news in Australian beef despite some in the sector doing it hard.

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A lot has been written about the record cattle prices we're seeing across the country and a key reason for that is the rebuilding phase Australia is going through following a number of years of drought.

"Demand for beef globally remains strong, notwithstanding the impact of pandemic.”

But the consequence of the restocking is less cattle coming to market. As a result, the processing industry is under capacity - which is tough for what is now Australia's largest manufacturing sector.

Compared with last year, we're seeing materially lower volumes going to Australia’s traditional beef export markets of the US, China, Korea and Japan. At the same time, we're seeing competition - particularly from North and South American countries - muscling into those markets.

You can bet even when Australia’s volumes return back to normal, those countries will be working hard to defend the access they've gained.

But there is good news. Demand for beef globally remains strong, notwithstanding the impact of the pandemic. And here in Australia we continue to produce a product the world wants. So the outlook is really positive.

On top of that, ANZ encourages the industry to focus on emerging opportunities in new markets. If the last 12 months has taught us anything, it's that in a world of pandemics, geopolitical tensions, tariffs and trade barriers, it pays to have a diversified customer base.

On top of those traditional markets for Australian beef, we see opportunities emerging in places like the Middle East, Indonesia, the Philippines and Vietnam, and we believe the sector will be looking towards these regions in the future.

Positive vibes

There was an air of grounded positivity in the cattle industry according to revellers at the Beef Australia Expo in Rockhampton, despite mixed conditions on either side of the supply chain.

Speaking on video at one of the first large-scale industry events held in person since the beginning of the pandemic, Fulton Market Group General Manager Connor FitzGerald said high beef prices had delivered mixed fortunes.

“If you're a cattle farmer at the moment, then things are extremely fortunate,” he said. “Prices are very high and the outlook's very, very good.”

“Conversely, if you're a meat packer, you're not having much fun at all.”

ANZ Regional Executive Lisa Hewitt said the cattle sector was looking “exceptionally positive for the next five years”.

“That's come off the back of some pretty tough times right across Australia for the beef industry,” she said, noting floods, drought and of course, the pandemic.

Supply conditions remain tight, according to Fitzgerald, with 2021 “from an annual production perspective, expected to be one of the lowest for beef production years”.

Hewitt said ANZ expects cattle prices to stay elevated and the bank remains committed to supporting its customers across the supply chain.

“The beef industry has experienced really great prices over the last couple of years and we're expecting that… to continue,” she said. “At the moment we’re trying to support our customers to get themselves into a position to really take advantage of that.”

Fitzgerald said Fulton, like many in the sector, was responding to the uncertainty of 2020 by installing contingency plans in the event of further issues.

“There was so much volatility and uncertainty thrown up by the pandemic that we're looking to… implement various resiliency measures that will enable us to weather the storm should another black-swan event like COVID-19 happen again,” he said.

Ian Hanrahan is Head of Food, Beverage & Agribusiness Australia at ANZ Institutional

This article was adapted from pieces originally published on ANZ’s Institutional website and can be found here and here.

The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.

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