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Australia's beef cattle industry
S14.1 BEEF CATTLE, Distribution - 30 June 2001
Source: 2000-01 Agricultural Census data.
Despite the introduction of Brahman cattle in the 1930s, Australia's beef herd continued to be dominated by Bos taurus cattle of British origin, such as Hereford, Aberdeen Angus and Beef Shorthorn, well into the 1950s. During the 1950s more Bos indicus breeds were introduced and they, and their crossbred offspring, have proven to be well suited to the northern parts of the continent. These cattle have played a major role in the development of Australia's northern cattle herd and the growth of the live cattle trade to South East Asia. In the late-1960s, large European Bos taurus breeds such as Limousin, Charolais and Simmental were introduced and crossed with British breed stock to produce later finishing, larger animals.
With this new mix of breeds, beef cattle numbers increased rapidly through the 1960s and 1970s to reach a peak of 29.8 million in 1976. Due to high levels of world production of beef and the imposition of quantitative limitations on imports by major overseas buyers, world beef prices collapsed during 1974-75. Drought and continued low prices in the early-1980s led to a decline in the beef herd to 19.4 million by March 1984. For the next five years, the size of the herd remained relatively static. Between 1989 and 2002, beef cattle numbers gradually increased to a peak of 24.7 million in June 2002, but the recent drought has reduced the beef herd by nearly 1.4 million head over the past two years (graph S14.2 and table S14.3).
According to the Food and Agriculture Organisation of the United Nations, Australia had the tenth largest cattle herd in the world in 2003, with the top four being India (226 million), Brazil (190 million), China (103 million), and the United States of America (USA) (96 million). Despite its relatively modest herd (about 2% of the world's cattle population), Australia is currently the world's largest exporter of beef contributing nearly 25% of the total beef traded. However, as Australia only produces about 4% of the total world beef supply, its share and pricing ability in the world market has always been susceptible to the influences of production levels in other major beef producing nations. One such factor, which greatly influences the profitability of Australian beef production, is the USA cattle production cycle. Peaks in this cycle have occurred about every 10 to 12 years and are usually triggered by high levels of grain production in the USA.
Other international events in recent years have also affected the industry. The Asian economic crisis of 1997 saw the value of Australia's trade of live cattle fall 22% in the year to June 1998. Sales the following year were no better. However, the falls were partially offset by increases in live cattle exports to Northern Africa. This increase in demand from Northern Africa occurred because their traditional European suppliers had been unable to provide cattle due to outbreaks of bovine spongiform encephalopathy (BSE or 'mad cow disease') and foot and mouth disease (FMD) in their herds.
Since 2000 a range of factors have contributed to fluctuations in Australia's beef and live cattle trade. These have included the detection of BSE in Japan, Canada and the USA (and associated falls in consumption), the value of the Australian dollar, a downturn in the USA food service sector (affecting the importation of manufacturing beef), changing attitudes to beef consumption in other markets, for example, the Philippines and Egypt, herd rebuilding in the USA, the war in Iraq and renewed economic growth in the USA and Asia in late-2003.
In 2002-03 there were 36,200 establishments classified as 'beef cattle' farms, accounting for 27% of the total 133,000 agricultural establishments. This compares with 5% in 1960, 19% in 1980, 15% in 1990 and 25% in 1995. Another 27,200 establishments were classified to the 'grain-sheep and grain-beef industry' and the 'sheep-beef' industry in 2002-03. This general trend toward increasing numbers of beef cattle establishments coincides with a decline in the numbers of 'dairy', 'sheep' and 'grain-sheep/grain-beef' establishments. In particular, the dairy industry has shed over 9,500 establishments (about 46%) since 1979-80.
In 2002-03, of the 23.6 million meat cattle herd, establishments classified to the beef cattle industry held 17.2 million head (or around 73% of the total herd), while establishments classified to the 'grain-sheep and grain-beef' industry and the 'sheep-beef' industry held 4.1 million head of cattle (or around 18% of the total herd). During the year, establishments with an EVAO of less than $200,000 accounted for 72% of all establishments with beef cattle but held only 30% of the beef herd. At the other end of the scale, establishments with an EVAO greater than $1m accounted for 3% of all farms with cattle and ran 32% of the beef herd.
In just over two decades, the size of the average cattle herd has increased by 52%. In 1979-80 the average herd numbered 218 and by 1989-90 it had risen to 301. By 1994-95, it had risen to 306 and in 2002-03 numbered 331. In 1979-80 small herds were common, with 72% of herds having less than 150 head. At the other end of the scale, just over 1% of herds contained over 2,000 head. By 1989-90 a move to larger herds had become apparent as the number of herds with less than 150 head had fallen to 60% while herds over 2,000 head had risen to 2%. In 2002-03 the situation remained about the same.
The production cycle of the beef industry has changed over the past 30 years with the introduction of feedlots. Feedlots are defined as 'a confined yard area with watering and feeding facilities where cattle are completely hand fed or mechanically fed for the purpose of production'.
Feedlots made their first appearance in the USA in the 1920s but it was not until the 1950s that Australia began experimenting with the concept. In the mid-1960s commercial feedlotting started on the Darling Downs in Queensland. This industry within an industry was born out of a demand from overseas customers, for a specifically tailored, consistently high quality, year round product.
Traditionally, Australian consumers have preferred leaner beef while some markets, especially the Japanese, prefer high levels of marbling in their beef. To meet these requirements, along with a growing domestic demand, cattle raised on pastures are 'finished' on a highly nutritious diet of grain feed prior to slaughter or live export. Barley and sorghum are the most common grains used. Cattle stay on this feed for periods varying from about 30 days up to about 300 days depending on the level of marbling and weight required by the particular customer.
Despite a setback to its evolution in 1975, when access to the Japanese market closed temporarily, the feedlot industry in Australia had grown to 830 feedlots by 1996 when accreditation first commenced. Since then, a significant number of mainly small lots have ceased operations or not achieved nor sought accreditation. As a result, the number of accredited feedlots was down to 710 by June 2000 and down further to 575 by March 2004. It is expected that over the next year or two this figure will increase slightly and eventually stabilise at about the 600 mark.
In contrast to the declining number of feedlots, total feedlot carrying capacity had risen to a record high of 926,000 head as at 31 March 2004. Numbers on-feed were reported to be 666,000 head (72% of total carrying capacity), nearly half of which was in Queensland and over a third in New South Wales. Of total capacity, 55% was held by 23 feedlots, each with a licensed capacity of 10,000 head or more. At the other extreme, 17% was held by about 481 feedlots, each with a licensed capacity of less than 1,000 head.
Most of the cattle being held on feedlots at 31 March 2004 were destined for the Japanese market (which was expected to consume 356,000 head or 53% of available supply). The next biggest market was the domestic market (which was expected to consume around 249,000 head or 37% of available supply).
Cattle slaughter rates have increased steadily over time as the cattle herd has grown and as consumer demands and preferences have changed. In 1901 about an eighth of the 8.6 million head herd were slaughtered while in 1950 a quarter of the then 9.7 million head herd were slaughtered. In 2003-04, 8.8 million cattle and calves were slaughtered, representing around 33% of the total cattle herd. In 2003-04 the dairy industry was estimated to have contributed nearly 1.7 million cattle to the total slaughter. This number was made up of 270,000 beef bred cattle, 860,000 bobby calves and 560,000 cull dairy cows.
Current average dressed carcass weight for cattle and calves stands at 232 kgs, a 36% increase on the 171 kgs in 1950. Slaughterings in 2003-04 were valued at over $6.0b while in 1949-50 slaughterings were valued (in 2004 prices) at $1.7b. Queensland slaughtered the most cattle and calves in 2003-04 (3.7 million) followed by Victoria (2.2 million), and New South Wales (1.8 million). Recent livestock slaughterings data show the effects of the 2002-03 drought. Beef production in 2003-04 fell 1.8% to 2.0 million tonnes over the previous year while veal production declined by 8% to 35,000 tonnes. The number of female cattle presented for slaughter dropped 6.2% in 2003-04 compared with 2002-03 while the number of male cattle slaughtered only dropped 1.9% as primary producers began the process of rebuilding herd numbers.
Beef and veal exports
In 1901 Australia exported 43,600 tonnes of beef (about 25% of total production and 2% of total export trade) valued at $122.3m (in 2004 prices). The main destinations were the United Kingdom (50%), South Africa (36%) and the Philippines (8%). In 2003-04 Australia exported 886,400 tonnes of beef and veal (44% of total beef/veal production) worth $3,908m (3.5% of total merchandise trade). In tonnage terms, this was 5% less than the previous year due to the effects of BSE on Australian exports to Canada and a strong Australian dollar affecting some Asian markets. In value terms, there was virtually no difference in the return to producers in 2003-04 due to the higher prices for beef in the USA and north Asian markets. It is also interesting to note that the price per tonne paid for export beef in 1901 (in 2004 prices) was 60% of what farmers received in 2003-04.
Despite the overall decline in the tonnage of beef and veal exported, shipments to the largest customers, the USA and Japan, increased 3% and 19% respectively in 2003-04. However, Canada's take fell 87% from 69,000 tonnes to 8,900 tonnes and exports to the Republic of (South) Korea, Taiwan, Indonesia and the Philippines combined declined by 28,000 tonnes (18%). Total beef and veal exports in 2003-04 were 25% more than in 1989-90 and nearly five times those of 1959-60 (table S14.4).
Live cattle exports
In 1901 Australia exported 2,413 live cattle valued at $44,000 and imported 114 cattle valued at $7,182. Since then, the balance has moved even further in Australia's favour with Australia exporting 683,000 head with a value of $460m in 2003-04, while importing only 4 beasts (for breeding) with a value of $168,000 in that year. Australia now exports more live cattle than any other country.
The majority of live cattle exported are classified as 'other than pure bred breeding animals' and are usually intended for slaughter in their country of destination. In 2003-04, 578,800 head of this type of cattle were exported. In recent years, Australia's trade in this commodity has fluctuated following a steady increase up to 1996-97, after which the Asian economic downturn caused shipments to fall 20% to 694,000 head in 1997-98. The main component of the lost trade during the two-year slump to June 1999, was an 80% fall in the export of cattle to Indonesia. On the other hand Libya in 1997-98 and Egypt in 1998-99 each increased their purchases four-fold (in both cases) to make up much of the difference over the period.
Live exports of cattle for slaughter rose to 846,000 head in 1999-2000 and remained at that level in 2000-01. This was due to an improvement in the Indonesian economy, the impacts of BSE and FMD in European and South American countries and a weaker Australian dollar. In 2001-02 live exports for slaughter fell 6% as cattle prices rose and the economic recoveries in Indonesia and the Philippines stalled. The record level in 2002-03 of 977,000 head (surpassing the previous high in 1996-97) was due to renewed demand from Indonesia along with increased demand from Malaysia, Saudi Arabia and Brunei.
However, the new level could not be maintained in 2003-04 as currency fluctuations saw exports of live slaughter cattle fall 41% to 578,800 head, a loss to Australia of $254m. Indonesia remained the largest export market despite reducing its take to 333,000 head, 31% less than the previous year. In other major losses, the Egyptian market virtually collapsed (104,000 to 3,000 head), exports to the Philippines were halved to 54,000 head and sales of live slaughter cattle to Saudi Arabia ceased altogether (from 52,000). Malaysia's share in 2003-04 also fell, down 30% to 67,000 head. One bright note in the year was a four-fold increase in sales to Jordan (9,000 to 38,000 head).
Domestic consumption of beef and veal
Over the past 40 years Australians' eating habits have undergone many changes. Reasons for these changes include new cultural influences, health considerations, changes in relative prices of different foods and substitutes, product marketing and so on. While beef/veal continues to be one of the most popular meats, it has both enjoyed and suffered the effects of these changes.
Beef and veal consumption grew from 40 kg per person in the late-1960s to a peak of 70 kg in 1976-77, coinciding with record production and low prices. Ten years later, reflecting changing attitudes to red meat, consumption had fallen to 39 kg. This trend continued with consumption in 1995-96 falling to 36 kg per person. The small increase to 37 kg per person in 2002-03 was expected to precede a period over the next several years during which time consumption of beef and veal will run at about 35-36 kg per person. Such fluctuations are not new and reflect changes in the cattle industry as well as changes in social attitudes and economic conditions. The relationship of beef cattle prices to beef consumption is shown in graphs S14.5 and S14.6.
Consumer preferences for alternative sources of protein have also changed with the main changes being the increased consumption of chicken and the reduced consumption of sheep meat. Consumption of chicken meat increased by 28% from 24 kg in 1988-89 to 31 kg per person in 1998-99. In 2002-03, per person consumption of chicken meat stood at 35 kg, with the Australian Bureau of Agriculture and Resource Economics (ABARE) expecting it to exceed consumption of beef/veal in 2003-04. Over the period from 1988-89 to 1998-99, sheep meat consumption fell from 22 kg per person to 16 kg, with a further decline to 14 kg expected in 2003-04.
By comparison, the consumption of pigmeat remained relatively constant through the 1990s at around 19 kg per person. It has since increased slightly and was expected to peak at 22 kg in 2003-04 before easing back to around the 20 kg mark. Seafood consumption remained in the 10-11 kg per person range during the 1990s but recent data suggests it may now almost rival sheep meat's consumption rate.
Assuming the return of normal seasonal conditions in 2004-05, ABARE expects the beef cattle herd to rebuild to pre-drought levels by 2006-07. This rebuilding, along with a drought affected calving and lower overall numbers, will cause slaughterings to decline by over 4% in 2004-05. Consequently, beef production in 2004-05 is forecast to fall by about 2% but increased average slaughter weights and smaller proportion of cows and calves should partially offset the lower slaughter numbers.
Exports of beef to Australia's biggest customer in this trade, the USA, are expected to fall slightly in 2004-05. Australia's herd rebuilding process will constrain its ability to increase supply and competition from other beef exporting countries is expected to see USA prices ease. In the Asian markets, prices are also forecast to fall, especially once the embargoes on USA beef are lifted (imposed after the discovery of a case of BSE) and USA product again becomes available in late-October 2004. An assumed depreciation of the Australian dollar should partially offset the affect of these price falls.
These same lower currency rates should also make overseas sales of Australian live cattle for slaughter more attractive. However, supply will be an issue and any increase of exports in this commodity is not expected to be large.
ABARE, Australian Commodities, vol. 11, no.1 March Qtr 2004
Australian Lot Feeders' Association/Meat and Livestock Australia, Feedlot Survey, March 2004
Bromby, R 1986, The Farming of Australia, Doubleday Australia, Sydney
Commonwealth Bureau of Census and Statistics, Commonwealth Production Statistics, various bulletins from 1902-11 issue
Dundon, P 1994, The Australian Feedlot Directory, Australian Lot Feeders' Association/Elders, Adelaide
Food and Agriculture Organisation (FAO) of the United Nations web site //faostat.fao.org/faostat/servlet
National Farmers Federation, Australian Agriculture, Volume Two, (edited by Cribb, J) Morescope, Camberwell, 1989/90
Queensland Department of Primary Industries and Energy 1991, History of the Australian Feedlot Industry , paper
Thomas, IR et al 1990, Livestock - Sheep, Cattle, Goats and Deer chapter in The Manual of Australian Agriculture (edited by Reid, RL), Butterworths, Sydney
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