Australian beef exports are on track to reach a new record amount and surpass the previous record set in 2014 at 1.32m tonnes, according to the latest quarterly report from Meat & Livestock Australia (MLA).

For the first six months of 2015, Australian beef exports are 11% ahead year-on-year at 646,685 tonnes as a result of high cattle slaughter and strong demand, principally from the US, Japan and Korea.

MLA says this momentum is only likely to slow a small amount in the second half of the year and believes beef exports will finish 2% higher than the 2014 record.

The US is comfortably the largest market for Australian beef with exports up 48% year-on-year, primarily driven by a more favourable exchange rate between the Australian dollar and the US dollar, and the high price of cattle and beef in the US.

The report also notes that although Brazil, one of the world’s largest beef exporters, has been granted access to two of Australia’s important export markets, China and the US, the short-term impact is likely to be minimal due to the time it will take for Brazilian beef processing plants to get regulatory clearance from authorities.

From a longer term perspective, the report suggests Brazilian beef exporters access to the US will be restrained by quotas and a 26.5% over quota tariff. In China, the rate of plant approvals will be the main influence.

Cattle supply

After beef exports reached record levels in 2014, industry analysts had projected a decline of 15% in the throughput of cattle at Australian meat plants to 7.8m head for 2015. However, this decline has not materialised as higher throughputs, particularly in the first six months, has lead MLA to revise throughput in 2015 to 9m head.

This will be the third consecutive year where more than 9m head exited the system and will result in much tighter supplies, especially in 2017, when adult cattle slaughter in Australia is forecast to fall below 7m head for the first time since 1996.

After these three years of high cattle slaughter, coupled with strong live export demand and that female cattle slaughter has be higher year-on-year for 31 consecutive months, the Australian cattle herd is expected to shrink to 26.1m head in 2016.

This marks an 11% decline, or 3.2m head, since the drought in Australia began in 2012 and will leave the national herd at the lowest it has been since 1995. A slow rebuild is expected due to the need for cash flow from Australian producers after three years of severe drought.