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Supply And Demand Factors For The Live Beef Cattle Export Market And The Effect Of The 2011 Ban Of Live Beef Cattle Exports To Indonesia

3693 words - 15 pages

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Supply and Demand Factors for the Live Beef Cattle Export
Market and the effect of the 2011 Ban of Live Beef Cattle Exports
to Indonesia
University of Western Australia
Masters of Business Administration
ECON5503 Economic Management and Strategy Trimester 3, 2013

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Introduction
Australia is the world's largest beef and live cattle exporter. Apart from accelerating global
demand for beef offering a significant opportunity to the Australian beef industry, the
expansion of cattle exports from Australia has reflected the competitive strength of an
industry in a context of liberalizing world beef markets (Pritchard 2006) so that by 2012, the
annual value of Australian beef (including live beef cattle exports) has doubled to US$700
million.
The beef industry (including live cattle exports) has been an important contributor to the
Australian agricultural economy. Global economic growth has fuelled increasing demand for
high quality Australian beef. The beef industry is vulnerable and influenced by internal
diversity, such as wide climatic and biogeographic variation, and consequent variation in
management systems, cattle genotypes, endemic diseases and supply chain infrastructure.
It's also sensitive to international market conditions and the international political
environment.
This article aims to analyse the demand and supply conditions of the Australian live beef
cattle export market and that of two interconnected markets, namely Australian chicken meat
and northern Australian rural land. We will then discuss the short and long run consequences
of the 2011 ban of live beef cattle exports to Indonesia.
Supply and Demand Drivers
There are numerous factors which drive demand and supply in the live beef cattle export
market. This paper will not attempt to cover all of those factors but focus on the two most
important drivers in both categories. On the demand side the two most important drivers are:
1. increased demand due to rising per capita meat consumption in developing countries;
and
2. foreign governments' policies,
(PwC 2011, CBA 2012 and IBIS World 2013).
One of the main drivers of supply is the cost of input prices. There are numerous subdrivers
of input prices such as labour costs, technology changes, farm size (economies of scale),

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location, taxes and tariffs (including the carbon tax) but we will focus on the one that has the
most significant impact, being climate/weather (PwC 2011 and IBIS World 2013). The other
factor influencing supply is producers' future expectations. We will cover each of the four
drivers in detail along with a discussion of the current conditions of each.
Rising Meat Consumption in Developing Countries
Historically developing countries have had a relatively low per capita meat consumption due
to lower income levels. As income levels increase people in developing countries increase
their demand for, amongst other things, protein and meat products such as beef. As such the
rise in the level of income in countries...

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