IN JUST two years the Australian cattle herd has gone from being at a 35-year high to what will be a 20-year low and it's playing out in the market with higher prices and a severe dip expected for export volumes during the next two years.
In releasing the Australian Cattle Industry Projections on Tuesday, Meat and Livestock Australia's Ben Thomas, Sydney, highlighted the dramatic sell-off of female cattle (well above 50pc of the total cattle slaughtered in recent years), indicative high export prices in 2014 and a devaluing Australian dollar among the catalysts for a decline in cattle slaughter, beef production, beef exports and an overall slip in the cattle herd during 2015.
The cattle herd was forecast to slip to 26.8 million head by June 2015 and by 2016 its expected to fall to 26.5m head due to a smaller breeding herd with fewer calves moving through the system.
"Looking beyond 2016, the herd is likely to slowly start rebuilding, assuming average pasture conditions, and by 2020 be back to 27.9m head - but still almost 1.4m head below 2013," Mr Thomas said.
"It is anticipated the southern herd will replenish slightly faster than in the north, largely due to greater fertility in the southern herd, before becoming more northern dominant again by the end of the projection period."
This rebuilding will contribute to lower volumes shipped than in 2014, but MLA thinks the industry will still export 1.05m tonnes.
Exports only topped a million tonnes for the first time in 2013, putting these still high projected levels into perspective.
Supply shortages will bring shipments back to 980,000t in 2016, but by 2018 - weather and everything else permitting - beef exports will be back in million-tonne-plus territory.
Live cattle exports will also contract - MLA thinks to about 850,000 head - because of tight cattle supplies, and will still be around 870,000 head out to 2017.
The strong live cattle prices of 2014, which closed the year at more than $2/kg liveweight, are likely to also contract because of tighter Indonesian import controls.
But the fundamentals of supply and demand for live cattle remain strong, because of ramped up demand from new markets in South-East Asia.
Shipments to Vietnam grew 207 per cent in 2014, to 167,000 head, lessening live exporters' reliance on Indo- nesia.
And the outlook for global beef demand, and Australia's role in supplying it, also remains robust - even though the record books are likely to show a drop in volume to all markets in 2015 as the local beef industry recalibrates.
Part of this recalibration will see adult cattle slaughter slump 15pc year-on-year in 2015 to 7.8m head, but eventually recover to 7.9m by 2020 which was slightly greater than the long-term average.
The big shift in recent years was the move from a long-term average of 47pc of the total cattle being females to 52pc last year.
This shift was unprecedented and only three times in the past (1977, 1998 and 2003) had female kills risen above 50pc.
Despite the forecast production declines, this year's forecast will still be only the third time beef exports will be more than one million tonnes.
"There are a number of noteworthy positives for the demand outlook, including improved market access, namely the Korean free trade agreement (FTA), Japan economic partnership agreement (EPA) and China FTA, as well as the easing Australian dollar and likely continued tight US beef supply," Mr Thomas said.
"The only significant constraint will be the significant year-on-year contraction in Australian beef supplies, resulting in expected market realignment.
"This will test the strength of price sensitive markets."
