As 2017 is underway, it is timely to consider what the year might bring for the Queensland cattle industry.
Domestically, producers continue to drive the market, looking to rebuild herds from a limited supply of cattle.
2017 has started strongly with a number of sales, particularly in southern Australia, showing strong prices and although domestic cattle prices have dropped from the peak of September 2016 they still remain high.
On the other hand, global prices which softened in 2016 continue to remain low.
This has been driven principally by increases in production and exports from the US and Brazil, both of which are expecting a 3-4 per cent growth in production in 2017.
Added to this is the general increase in protein production. US pork and poultry production are forecast to increase by between 3-4pc, keeping pressure on US retail beef prices.
Four main themes will play out in the global market in 2017.
Firstly, the growth in South American production and exports, and with new market access South American producers will have a strong influence on global trade. Supply into the US market will be competitive, not only with the growing domestic beef, chicken and pork production, but between new competitors such as Brazil. Import demand from China is expected to grow given a reduction in domestic production, however, a weaker economy will potentially reduce demand for beef in the general population.
Finally, the opportunities in South East Asia with large growth potential but demand sensitive to cheap Indian buffalo and political decisions.
Beyond those themes, there are a couple of things to watch in 2017 including access to the Indonesian market and the potential of US and China to establish official beef trade. Late in 2016 the US and NZ were successful in a dispute lodged with the WTO over some of the Indonesian trading arrangements. While Indonesia is appealing the decision it could be the catalyst for changes to the whole quota system.
In late 2016 the Chinese premier announced China could soon allow imports of US beef. While still a potential, there are a number of technical requirements that need to be resolved before any product can be shipped, furthermore, the new US president may have an influence on this outcome.
In all there is expected to be downward pressure on Queensland cattle prices from the global market. The combatant for this is domestic restocking demand, and that, will depend to a large extent on the weather.