Expectations for currency impacts on beef trade in 2016

17 December 2015

Underpinned by the strengthening US$ over the past 12 months, the price of US beef has increased relative to that supplied by other major world exporters, including Australia and New Zealand.

According to Steiner Consulting Group (Daily livestock report; US Trade Outlook) expectations are that this currency strength will remain, on the assumption of the US Federal Reserve raising interest rates in 2016, while other major economies are less likely to move in the same direction. According to Steiner, this movement should increase the demand for and value of the US$, and further influence trade conditions throughout the year.

With the US$ expected to be higher in 2016, US beef could remain relatively more expensive in markets like Japan and Korea, assisting the competitiveness Australian beef. On the other hand, if US beef exports are lower it would result in more US beef remaining on the domestic market, potentially reducing US demand for imported beef. As to whether this scenario is net positive or negative for Australia, it would depend on the extent to which US trade is diverted.

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