Live cattle export suspension aftershocks affecting all beef farmers

Published 20130724

The suspension of live cattle exports to Indonesia in mid 2011, and the subsequent dramatic decline in the number of live cattle exported from Australia , had a large and immediate impact on beef cattle farmers in northern Australia, but was not considered to be something of great concern for beef producers in the south. Evidence is now emerging, however, that the aftershocks of that event are affecting the entire beef industry, and reinforcing the importance of live cattle exports for the entire industry, not just for northern Australian beef producers.

Subsequent to the broadcast of images of animal cruelty involving Australian cattle in some Indonesian abattoirs, the Australian government suspended live cattle exports to Indonesia for several months, and these were later resumed under a new quality assurance system (ESCAS) which required exporters to keep track of exported cattle to the point of slaughter. The Indonesian government responded to the sudden trade suspension by reducing live cattle import quotas for Australian cattle, and stating that Indonesia would in future take steps to become self sufficient in beef production. 

As a result of these events, the numbers of live cattle exported to Indonesia has been dramatically reduced, down from a record level of 770,000 in 2009 to 278,000 in 2012.

The trade suspension occurred in the middle of the annual mustering season in northern Australia, and the result was that many young cattle destined for export in 2011 were retained on properties in the hope of being able to be exported at a later date, or to be sold into other markets. The relatively high cattle numbers were maintained on northern cattle properties through 2012 in the hope of markets again becoming available, and given the lack of available alternative markets. 

Many of these cattle properties then experienced very adverse seasonal conditions, with the ‘wet’ season failing to occur in late 2012/early 2013 across much of northern Australia. As pasture availability declined in some areas, especially north western Queensland, cattle farmers were forced to either shoot cattle, or where economically feasible, to ship them south to abattoirs. The result was record high slaughter numbers by Australian beef processing plants over the past few months, as can be observed in the following figure.

What is also evident from the above graph, however, is the large impact this flow of extra cattle to slaughter has had on Australian cattle prices. The above graph shows the Australian Eastern Young Cattle Indicator price (EYCI), abjusted for the $A/$US exchange rate, and compared with a similar indicator price for beef cattle in the USA. It highlights that these two cattle price indicators are generally fairly similar, but that since early 2013 when slaughter numbers began to rise, there has been a marked divergence between the price indicators, and in fact the difference is bigger than it has ever been at any time in the past. 
The EYCI is an indicator price derived from livestock sales throughout eastern Australia including NSW and Victoria, and the decline in that indicator (in currency adjusted terms) relative to the US price indicator highlights the flow-on impacts of the events in the northern cattle industry to industry participants in southern Australia. At a time when global beef prices are relatively buoyant, Australian beef cattle prices have declined markedly, resulting in a significant loss of revenue for all beef cattle producers and beef processors.
The above graph highlights the interdependence of the northern and southern beef industries in Australia, and also highlights that the impact of a ban on live cattle exports (as proposed by some policymakers and a number of animal welfare groups) would be much more widespread than just the northern cattle industry.
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