1. Australia’s beef in a competitive international market Tim McRae Chief Economist & Manager – Market Information and Analysis, MLA

2. What are you going to hear… 1.Quickly go back in time to previous NTCA presentations. 2.Have a look over the fence at what's happening in the US and Brazil. 3.Some basic numbers for 2014 & beyond. 4.What does this all mean

3. 3rd time around at NTCA… 2010: - medium to long term demand for beef to improve as economies and incomes recover and population growth continues…but where will the beef come from? - Asian demand tipped to be the driving force for growth. 2011: “Overall, the fundamentals of the global beef market points to a period of rejuvenated demand and higher prices. With seasonal conditions set to boost production levels, the Australian beef industry is very well placed to capitalise”.

4. But I’ve heard cattle prices in other countries…. US up 24% for choice cattle, 19% for feeders and 20% for cows Brazil steers up 20% year-on-year Uruguay steers up 26% NZ steers up 31% Export prices to Japan up 15% in AUD (fullsets) Export prices to US up 22% in AUD (90CL) (all % changes are year-on-year) …have Aussie cattle producers missed the boat?

5. The US market is short of beef…

6. Record US prices from “gate to plate” US cattle prices have surged to record levels US cattle herd at lowest level in 60 years US 90CL imported beef prices at all- time high

7. Brazilian market flat out meeting demand… Slaughter cattle prices exceeded R$4 for the first time on record in March 2014 (177US¢/kg lwt) Robust domestic demand – 200m pop @ 40kg head Strong export growth – Russia, HK, Venezuela, Egypt …all helped by a 30% decline in the Brazilian currency since peaking in 2011. USDA: “ Exports are forecast nearly 8 percent higher at over 1.9 million tons, mostly driven by increased competiveness from the depreciation of the Real”.

8. But the US and Brazil have some big advantages… Massive domestic markets - US = 11 million tonnes cwt (316 million people) - Brazil = 8 million tonne cwt (200 million people) For the US producer: 90-95% of all beef produced is transacted with NO currency or market access constraints For Brazilian producers: 80-85% of all beef produced is transacted with NO currency or market access constraints

9. For Aussie cattle, 2013 will not be seen again… Cattle & beef: 1.1 million tonnes beef exported - 8.34m slaughter, highest since 1978 & prices take a hit! Live cattle: 851,000 head shipped 3 big “external factors” Severe drought spreads rapidly though QLD & NSW A$ drops to below 90US¢ Live export situation improves significantly

10. Record slaughter = record % of production exported Record beef exports = 1.1m tonnes Record 68.4% of production Record exports to “other markets” No stockpile of beef! …but… Japan remains tough Returns for chilled beef constrained Strong competition Major access constraints

11. Traditional trade patterns have been shaken… “China, the world’s biggest meat consumer, may double beef imports by 2018 as consumers can afford to buy more products they deem to be safer and healthier, according to Rabobank International” (Dec 2013, SMH) Aussie beef to China

12. Future markets for Australian beef exports Beef exports as a % of production to sustain increasing trend…China, US, Korea, Indonesia.

13. Japan turning away from chilled beef…

14. US is attracting more beef in 2014

15. Looks likely that Chinese demand will be sustained

16. Indonesia showing very strong demand for beef

17. Future markets for Australian live cattle exports

18. Indonesian recovery has been very welcome…

19. Will we have the cattle to meet boxed and live demand?

20. 8.34 million head

21. The supply of cattle is about to get very tight… In the past 18 month total cattle turnoff (slaughter + live) has been at its highest level since the mid 1970’s…but we did have a build up for 2 years prior. Add to this turnoff the increased deaths from drought Plus what will be very low branding rates for 2012, 2013 and early 2014

22. The supply of cattle is about to get very tight… Higher outflows with decreased inflows = significant contraction in available supplies for 2014, 2015 and possible into 2016. “There could be up 2.5 million head less cattle entering the cattle herd between January 2013 and December 2014” …but just when will the supply pendulum swing?

23. About bloody time it rained! The falls this week has seen a significant jump in the market, matched by a sharp contraction in turnoff…but more needed, especially in western QLD and NSW. Northern regions have been much better, which should go well for the year ahead

24. So lets pull all this together… 1.The world is after more beef & global cattle prices have been reflecting this… 2.Australian cattle producers “taste” of this rising market has been non-existent…but for very clear reasons – A$ & drought induced supply surge. 3.The supply pendulum will swing very quickly at some stage in 2014…we have a major “market- ready cattle” inventory shortage looming!

25. Thankyou