AAco curbs hopes for Indonesia cattle trade

Hopes of a rapid resumption of Australian live cattle trade to its top export market, Indonesia, are premature, Australian Agricultural Company said, adding that beef prices would continue to feel the impact of the trade hiccups.

Rival cattle exporter Elders lifted expectations for the resumption of exports – temporarily banned on grounds of poor levels of animal welfare in Indonesia – by saying that the group might see a shipment early next month.

However, Australian Agricultural Company, Australia’s largest cattle rancher, said it was "no optimistic that the export of live cattle will recommence in early August".

"No Australian or global export of live cattle to Indonesia has been granted or approved an export licence since the ban was lifted on July 6," the group, better known as AAco, said.

‘Trickle trade’

And David Farley, the AAco chief executive, flagged that further ahead, prospects were bleak too, saying that "over the long haul, I think between now and Christmas, numbers will be limited".

"We will be operating on a trickle trade, not the normal trade that we have had in the past."

Australia, while lifting its ban on live cattle shipments, has said that future exports are conditional on traders showing evidence of high animal welfare standards throughout the processing chain in Indonesia.

This has angered many Australian groups for shifting to companies "a job that government should be doing", an industry insider told Agrimoney.com.

"We have got a lot of people very frustrated about how long all this is taking," the insider added.

The ban has also hit the sector at a poor time, at the height of the export season when shipments can average 15,000 animals a day, with trade tailing off in the wet season in northern Australia – the centre of the live cattle trade sector – when logistics become difficult, the insider added.

Indeed, it has prompted an "oversupply" in Australian beef, forcing a drop in prices which Mr Farley warned were "unlikely to correct in the coming months".

Loss widens

The impact of the ban on prices prompted AAco to take a Aus$8.2m writedown on the value of one of its herds, driving the group’s after-tax loss 3% higher to Aus$12.6m for the first half of 2011, despite a jump in revenues.

Sales soared 53% to Aus$58.2m, lifted by a near-doubling in sales – led by live cattle exports – albeit struck at lower average prices than a year ago.

AAco also unveiled the sale of its Meteor Downs property in Queensland to mining group Xstrata to a price Aus$5.8m above book value, implying a one-off boost to second half results.

The group stood by its outlook for earnings before interest, tax, depreciation and amortisation of Aus$50m-60m for the full year, helped by sales of 11,000 cattle booked at prices before the ban.

AAco shares closed down 1.4% at Aus$1.39 in Sydney.

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