Aussie Cattle Export Ban Impacts Local Markets
Blocked sales of cattle to Indonesia over animal welfare issues impacts the countries local markets.
Compiled by staff
Published: Jun 16, 2011
Imagine if a market representing nearly 10% of sales closed up overnight? U.S. Beef producers have faced that kind of challenge in the past and Australian feedlots have that problem today. A ban on beef exports to Indonesia, instituted last month, remains in effect - but the cattle keep on reaching finishing weight.
Agribusinesses report in Stock & Land, a rural weekly paper in Australia, that they're not spooked by the ban and are making changes to work in the new environment. Indonesia has a lot of processing capability, which will now shift back to Australia. One major processor - Australian Agricultural Company - is working to fast-track plans to build it's own processing facility and it's directing stock originally headed out of the country back into the local market.
AACo's is taking an earnings hit from the lost sales, but the share price hasn't. That's due in part to the potential temporary nature of the ban. There's already talk of the ban ending soon as Indonesia restructures key processors that could start taking beef if they can prove they meet animal welfare standards.
There is a concern that redirecting that cattle to the local market will cause logistical and processing problems. Another impact of the ban, should it go on longer, is reduced land values in key beef producing areas in the Northern Territory and northern Queensland.
Current land values in that region have been bolstered by the live export trade that has flourished in the past 15 years. Other factors are also weighing on land prices in the region, but the ban's effect could be significant.
Major banks and trading companies do see the two governments at work to help solve the problem in Indonesia, which might loosen exports soon. AACo could manage some of the impact by reducing its purchases of cattle to finish, which would cause a ripple effect into the country's beef industry.
Efforts to reopen trade are underway, but initial restart of trade might only be with a few feedlots and abattoirs where animals can be monitored by electronic tagging. Not every processor in Indonesia is set up with that kind of technology. However, the talks so far lean toward beef exports back to Indonesia starting in a few weeks, not months, according to the Stock & Land report.
Stock & Land and Farm Progress are Fairfax Media properties.
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Tagged: land values, farm, farm progress, land prices
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