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Farm Economics - Feedlot Industry.

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Introduction

FARM BUSINESS MANAGEMENT 1 - 2002 FARM ECONOMICS-TERM 1 FEEDLOT INDUSTRY LECTURER: CAMPBELL JEFFREY STUDENT NUMBER: 1407 DUE DATE: MARCH 22, 2002 Table of Contents SUPPLY AND DEMAND PATTERNS 1 DEMAND FORCES 1 Factors affecting demand by Japan in the last 10 years 2 FACTORS AFFECTING SUPPLY 4 RESPECTIVE ELASTICITY MEASURES 5 PRICE MOVEMENTS 6 REFERENCES 7 ACKNOWLEDGEMENTS 7 Prior to the 1990s, feedlots were used either to combat drought or opportunistically by producers, gaining an advantage when the grain prices were low. In the last ten years the Japanese beef market has been liberalised subsequently there has been an increase in demand for imported grainfed beef. Resulting in a huge growth of the feedlot sector within Australia. Cattle numbers in these feed lots has risen from 80 000 in 1985 to 640 000 in 2001. Also there is currently 850 feed lots accredited by the 'National Feedlot Accreditation Scheme', combined to form a total capacity of 850 000 (MLA March 21 2002). Supply and Demand Patterns Australia is the largest exporter of beef in the world. if you take into account feedlot meat and live export, 65% of total production is exported (MLA March 21 2002), Total numbers on feed reflect the supply and demand forces. ...read more.

Middle

Food safety is a big issue and food pathogens were highly publicized as a cause of several food poisoning outbreaks. These pathogens found in salad products caused beef demand to decline. (Nichols) From 1997 on the Australian dollar continued to weaken. Consequently MLA marketing vigor in Japan increased. The result was increasing demand as the Japanese recognised consistent quality and good price due to favorable trading terms because of the weak A$. Numbers on feed continue to increase until the end of 2001 despite diagnosis of BSE in a Japanese dairy and a subsequent confirmation in a second animal. Number of cattle on feed dropped 14 percent in the three months from the end of September to the end of December last year (MLA). The BSE crisis in Japan has been blamed for this. Cattle on feed for the December quarter (traditionally the time of their highest levels) were 637,410 head, and turnoff was about 497,000 head, 17 percent less than during the September quarter (Mathers). Total beef consumption in Japan has reduced dramatically with the Australian exports down 15% in late 2001. ...read more.

Conclusion

The USDA is now forecasting beef supplies to "fall by 2.6% to 25.5 billion pounds for 2002." Declining US beef availability and higher prices should ease competition to Australian beef in Asian markets therefore increasing the price. Price Movements In 1993/94 the Australian cattle herd of 25.8 million head was similar to the 25.2 million head of 1980/81. However, due to advances in beef feedlot technology beef production was 24 per cent higher than 1980/81. Thus the cattle industry has greatly improved Australia's international export growth to $2.2 billion or 200 per cent in export earnings from beef over this 13 year period (from $1.1 billion in 1980/81 to $3.3 billion in 1993/94). This export growth accelerated in the early 1990s due to the industry's successful penetration of Asian markets. With growth of $1.5 billion or 90 per cent in beef export earnings over the 5 years to 1993/94 and $145 million or 240 per cent in live cattle export earnings over the 4 years to 1994/95. (Mathers) Export growth has only been made possible by a more customer or end-user focus, more targeting of production to better meet customer needs and better communication and integration with the other stages of the beef production chain. ...read more.

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