SLIDING exports to key grain-fed beef markets could take a further hit well into next year as food costs around the world climb to record highs on the back of skyrocketing agricultural commodity prices.
The dire picture painted by Rabobank this week is forecasting a looming period of "agflation" that will hammer feed intensive crops the hardest with serious impacts on demand for animal proteins and dairy products.
Rabobank's global head of agri commodity markets Luke Chandler said the price hike would see more consumers switch to cheaper staples likes rice and wheat, stalling the recent gains Australian beef and sheepmeat has made in markets such as Asia, the Middle East and North Africa.
"In developed economies - especially the US and Europe - where meat and corn price elasticity is low, the knock-on effect of high grain prices will be felt for some time to come," he said.
The grim outlook comes as Meat and Livestock Australia predicts another tough export climate for Australian beef producers in 2013.
While Australian beef and veal exports for this financial year are forecast to increase 1 per cent on the previous 12 months to 955,000 tonnes, most of that modest jump will be attributed to increased demand from the US.
Using ABARES' Agricultural commodities, September quarter 2012 report, MLA is quoting a 5pc jump in beef exports to the US assisted by tighter US beef supplies and rising demand for imported beef.
The same reports also forecasts an increase in export volumes of 3pc to Australia's emerging markets, the same customers which Rabobank suggests will dump high-priced protein products in favour of cheaper food items in 2013.
Exports to Japan and Korea are expected to remain in the doldrums for the foreseeable future as the strong Australian dollar and increased competition from the US keeps prospects subdued.
Japan is forecast to receive 3pc less Australian beef in 2012-13, at 315,000 tonnes, with demand for high valued chilled cuts under significant price pressure from US beef. Reflecting the tough market conditions, demand for lower priced frozen Australian beef is expected to be maintained.
Australian beef exports to Korea in 2012-13 are forecast to decline 9pc year-on-year, to 112,000 tonnes.
Analysis says the mixed outlook is against a volatile background of commodity price inflation largely the result of weather driven events in large food exporting nations, principally the most severe drought in the US since 1936 and similar water shortages in Russia and South America.
Mr Chandler said the spike in grain and oilseed prices would reverberate strongly through the supply chains of all exporting food and agricultural countries, sending meat prices soaring.
Australian Lot Feeders Association president Jim Cudmore, whose organisation meets on the Gold Coast next month for its biennial BeefEx national conference, said he remained optimistic in the face of current challenges.
'The last time we saw such high prices for feed grain was at the end of 2007 when there was genuinely a shortage of grain around the world, whereas this time we're just being touched up on the price by some underperforming crops in Europe and the US corn crop which has taken a belting due to drought," he said.
"That said, the trend over the last four to five years has seen a gradual reduction in consumer demand for high quality grain-fed beef around the world. What's reduced our competitiveness most of all is the high Australian dollar, not the high grain price."
Mr Cudmore, who will leave his role as president next month after four years at the helm of ALFA, said a strong domestic market, driven by Woolworths decision to carry MSA graded beef, was helping to underpin the feedlot industry.
"Grain prices will have an impact on cattle production and the herd has been in a rebuilding phase for the last two or three seasons, so we'll start to see more cattle available for market from about October this year," he said.
"If the long-range weather forecast plays out and we see more cattle turned off because of the dry then we could see a reduction in feeder cattle prices which will help to compensate for the higher grain price."
Mr Cudmore's assessment is backed by MLA forecasts that expect herd growth to slow from this summer.
MLA economist Tim McRae said herd growth in 2011-12 was estimated at 5pc and was forecast to slow to 2pc in 2012-13, taking the Australian herd to 30.5 million head.
He said Australian cattle slaughter in 2012-13 was forecast to increase 3pc year-on-year, largely the result of two years of herd rebuilding and an increase of market-ready cattle throughout the first half of 2012.
Source: farmonline.com.au
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