AUSTRALIA'S live cattle trade smashed records in the last financial year, soaring past $1 billion in value as exporters shipped 1.13 million head of cattle.
Live export demand could be even stronger in the current financial year, but questions about Australia’s short-term ability to supply burgeoning markets are being asked as a massive cattle slaughter continues, driven by punishingly dry conditions across large swathes of cattle country.
In the meantime, though, history has recorded 2013-14 as a golden year for the trade.
The 79 per cent increase on animals shipped over 2012-13 was driven by a doubling of demand from Indonesia, which took 624,749 head, and the emergence of Vietnam as a major destination for the trade.
Cattle shipped to Vietnam increased more than eight-fold over 2012-13, to 131,367 head, representing $124 million in value. The Vietnam trade is largely driven by demand from China, which is draining the domestic herds of surrounding countries in its new appetite for beef.
Israel wasn’t far behind Vietnam, taking 108,053 head valued at A$83.7 million.
China also drove a six per cent increase in shipments of dairy cattle. Dairy cattle exports reached 92,629 head, worth $200 million. About 85pc of cattle went to China, which is building herds to cater for a massive growth in demand for dairy products.
Darwin was again the largest live export port in 2013-14, shipping 415,427 head, followed by Townsville (203,824 head) and Fremantle (140,932 head).
With no signs of demand slowing - in fact, the reverse - the setting is there for the 2013-14 record to be smashed in the current financial year.
Challenges to sustaining the market
The challenge for Australia is that its capacity to supply stock is likely to be strained, whatever the weather throws up.
A record cattle slaughter continues with no signs of letting up, as dry conditions start to grip from the Bight to the Gulf.
Large swathes of the Northern Territory have had their driest three months in at least 33 years, reported Ben Hindle, chief executive of the NT Livestock Exporters Association.
That’s already put a hole in live export orders. Up to 10-15pc of drafts of cattle that were ready for export have “gone off” waiting for the boat, Mr Hindle said.
Over large swathes of Queensland, cattle herds have been reduced to core breeders during prolonged drought, although some areas have had reviving rain over the past few weeks.
The cattle capacity crunch coincides with what is reported as being the biggest release of live cattle import permits that Indonesia has ever delivered.
The Jakarta Globe and other sources say that Indonesia is granting permits for the import of 264,000 head of cattle in the fourth quarter of 2014, 136,000 head more than expected and a 37pc jump on Q3 permits.
Partogi Pangaribuan, Indonesia’s director general for international trade, has said the surge in permits is intended to counter the beef scarcity that tends to occur in Indonesia early in the year, and to build up domestic cattle stocks as international taste for beefs grows exponentially.
“We are monitoring the development of the cattle market in Australia and seeing that we have to compete with buyers from China and United States,” Partogi said.
Questions about Indonesia's demand
Ben Hindle wonders whether other calculations are at work.
The number of permits is clearly beyond Australia’s current capacity to supply, Mr Hindle said, and the Australia-Indonesia supply chain is “jammed full from end to end”. There are about 206,000 head of cattle already on feed in Indonesia.
The disconnect between the size of the permit allocation and the reality of the supply chain is so large that Mr Hindle is wondering whether it drives a political agenda.
“If Australia can’t supply enough cattle, does that allow Indonesia to say we are unreliable, which gives it a reason to drop its import standards and source South American cattle?” Mr Hindle said.
One thing seems clear: Australia won’t be able to fulfil permits for 264,000 head of cattle, if that is indeed the Q4 allocation; and a widespread seasonal break, if it comes, seems almost certain to drive cattle prices to record levels, dampening Australia’s price advantage.
The figures show 2013-14 as a year of unusual stability and prosperity for the live export trade. Whether the expectations developed over the year prove sustainable is another matter.