News & Events | Australia | Drastic Drought Measures Contemplated

Australia

Drastic Drought Measures Contemplated

Australian Prime Minister John Howard recently said the nation could turn off irrigation taps to agriculture in the Murray-Darling river basis, one of the country's largest agricultural districts, if no rain is received in the next eight weeks. The district accounts for half of Australia's crop land, but flows of water into the basin during the first quarter of 2007 were the lowest on record, according to news reports. The district, larger in size than Japan, supports one-half of the country's sheep herd and one-quarter of the nation's cattle.

Prime Minister Howard stated the plan would be necessary to ensure adequate water supplies to urban areas, and also acknowledged the drastic measures could raise food prices and food imports.

More drought news caused sell offs in Australian cattle sales yards, according to a Meat and Livestock Australia (MLA) report last week. Deteriorating drought conditions have caused lighter weight steers, heifers and calves to be marketed in greater numbers, contributing to the sharpest fall in live cattle prices of all sizes and grades in the past six months.

A high currency and weak overseas demand is exacerbating the situation. The Australian dollar reached a 17-year high against the U.S. greenback last week, causing fears that buying interest in Australian beef could weaken. Export uncertainty is increasing as the South Korean media reported a U.S. beef shipment landed in Seoul this morning. Korean beef importers are still unclear when large volume U.S. beef imports could resume, although many rushed after supplies in the first quarter when three successive U.S. beef shipments failed to clear inspection.

Korean and Japanese beef imports for the first two months of 2007 were up 30 percent and 10 percent respectively, leading to some concern that North Asian markets may be well stocked and unable to maintain the recent pace of beef buying.

The soaring Australian dollar already is having an impact on food and livestock product trade patterns. Australia's pork imports are surging. Imports for the first two months of this year were up 60 percent over the pace of the same time period last year. Monthly import levels since last November have been near or more than 9,000 metric tons, exceeding any prior monthly total.

Australian hog raisers are nervous about the global rise in feedgrain prices. Average slaughter weights are declining as is the moving annual total slaughter. Australian pork production costs were approximately 20 percent higher than U.S. costs in 2006. Feed inputs represent around 60 percent of the total cost of pig meat production in Australia, according to the Australian Bureau of Agricultural and Resource Economics (ABARE). ABARE projections show Australian pork production declining over the next five years, with 2011 production 5 percent lower than in 2006. Australian per capita pork consumption is projected to increase by 2 percent over the same time period, with total imports increasing by 23 percent.

USMEF is currently hosting a team of Australian and New Zealand pork buyers in the United States. The buyers will visit and tour several facilities and supermarkets to better understand U.S. pork production, fabrication and merchandising.