Middle East and North Africa (MENA)

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Middle East and

North Africa

(MENA)

Sheepmeat and beef

2012 update

Ben Larkin – April 2013 blarkin@mla.com.au +61 2 9463 9395

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MLA Market Information

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Economic growth rates - Key export markets

Source: International Monetary Fund

2010 2011 2012f 2013f 0 2 4 6 8 % change year-on-year

UAE Saudi Arabia Jordan Developed world average

Figure 1

Overview

 Economic growth across the Middle East and North Africa (MENA) was strong in 2012, and is tipped to remain positive throughout 2013. High hydrocarbon prices in recent years have fuelled economic growth in many of Australia’s red meat markets in the region. However, the region can be broken into two distinct economic groups, ‘oil exporters’ and ‘oil importers’, with oil exporters set to fair better with high hydrocarbon prices.

 Australian red meat exports to the MENA region totalled 135,312 tonnes swt (shipped weight) in 2012. This was a 23% increase on 2011 shipments, and 32% above the five year average for Australian red meat exports to MENA.

 The MENA region, for the third year running, was Australia’s largest destination for Australian lamb exports, with shipments totalling 55,076 tonnes swt in 2012. Total global Australian lamb exports reached record levels in 2012, with increased production also contributing to the growth in shipments to the region.

 Signifying the growing importance of MENA as a destination for Australian lamb, exports to the region accounted for 29% of all Australian lamb exports in 2012, up from 22% in 2011. Mutton exports rebounded in 2012, after three years of decline. An increase in production in Australia and the corresponding reduction in prices contributed to the growth in Australian mutton exports to the MENA region in 2012. Mutton exports totalled 47,348 tonnes swt, a 20% increase on 2011 volumes.

 Beef volumes declined slightly in 2012, after six straight years of growth. Beef shipments totalled 32,737 tonnes swt in 2012, 5% down on 2011. Although decreasing slightly in 2012, beef shipments remained well above the five year average of 18,974 tonnes swt.

Economic and financial conditions

 Economic growth is estimated to have reached 5.3% across the MENA region in 2012, while growth of 3.6% is forecast by the International Monetary Fund (IMF) in 2013. The 2012 figure was well above the global average of 3.3%.

Australia’s largest red meat market in the region, the United Arab Emirates (UAE),

registered economic growth of 4% in 2012, while Saudi Arabia (6%) and Jordan (3%), Australia’s second and third largest markets, respectively, also recorded strong expansion.

 Oil prices, a key determinant of wealth in the region, are forecast to remain high in 2013, with Business Monitor International (BMI) forecasting oil prices to average US$102/bbl.

Conflicts in Libya and Egypt appear to have past their

peaks, with economic growth recovering in both nations throughout 2012. However, civil war in Syria and continued instability within the entire region surrounding the Arab Spring present increased risks for further social tension and conflict. Conflict and uncertainty in the region will hamper trade, tourism and investment throughout 2013, curtailing the potential for economic growth.

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Australian lamb exports to MENA

Source: DAFF and MLA forecast

04' 05' 06' 07' 08' 09' 10' 11' 12' 13f 0 10 20 30 40 50 60 '000 tonnes swt

Chilled Frozen Forecast

Figure 2 f = forecast Source: DAFF UAE 24.0% Jordan 23.5% Iran 13.2% Qatar 10.8% Saudi Arabia 7.2% Bahrain 6.0% Other 15.3% Source: DAFF Figure 3

Australian lamb exports to MENA

Australian lamb exports

Australian lamb exports totalled 55,076 tonnes swt in 2012, a record for lamb shipments

to MENA and 61% above the five year average for lamb exports to the market.

Chilled lamb exports accounted for 59% of all Australian shipments. Growth in chilled

shipments fuelled the overall spike in exports to MENA, with chilled lamb exports increasing 68% on 2011 volumes.

An increase in Australian lamb supply throughout 2012, a reduction in lamb prices

on the record highs seen in 2011, and a slowdown in Australian live sheep exports to the MENA region contributed to the growth in Australian lamb exports.

The UAE was Australia’s largest market for lamb in

the MENA region in 2012, with 13,205 tonnes swt shipped, followed by Jordan (12,959 tonnes swt) and Iran (7,271 tonnes swt).

 Exports to Bahrain totalled 3,326 tonnes swt in 2012, well above the 28 tonnes swt shipped in 2011. Exports to Iran almost tripled on 2011 volumes to total 7,271 tonnes swt, while Jordan (47% year-on-year growth) and Qatar (70% year-on-year growth) also took significantly more Australian lamb.

 Libya rebounded in 2012 as a destination for Australian lamb exports, after shipments reached a low of 104 tonnes swt in 2011 as the country was gripped by civil war. Shipments reached 2,237 tonnes swt in 2012, approaching the record for Australian lamb exports to Libya set in 2008 of 3,407 tonnes swt.

 Exports of carcase lamb dominated the cuts mix shipped to the region. Carcase exports accounted for 60% of Australian shipments to MENA, with carcase exports more than doubling on 2011 volumes. The majority of carcase exports (74%) were chilled airfreight.

 Lamb leg was also shipped in large quantities to the MENA region, accounting for 12% of overall lamb exports, followed by shoulder (10%) and forequarter (7%).

 Driving the growth in carcase exports were large increases in shipments to Qatar (2,722 tonnes in 2011 to 5,302 tonnes swt in 2012), Jordan (1,847 tonnes swt to 6,233 tonnes swt) and Iran (892 tonnes swt to 4,999 tonnes swt).

Figure 4

Australian lamb exports to MENA by cut

Carcase 60.9% Leg 11.1% Shoulder 9.3% Forequarter 7.4% Rack 4.3% Other 6.9% Carcase 44.9% Leg 12.7% Shoulder 13.1% Forequarter 15.0% Rack 4.0% Other 10.3% Carcase 59.7% Leg 11. 8% Should er 10. 5% Foreq uarter 7.4% Rack 2.7% O ther 8.0% 2007 27,010 tonnes swt 2011 35,643 tonnes swt 2012 55,076 tonnes swt

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MLA Market Information

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Australian mutton exports to MENA

Source: DAFF and MLA forecast

04' 05' 06' 07' 08' 09' 10' 11' 12' 13f 0 10 20 30 40 50 60 '000 tonnes swt

Chilled Frozen Forecast

Figure 5 f = forecast Saudi Arabia 26.7% UAE 23.5% Bahrain 13.3% Kuwait 12.2% Egypt 7.3% Other 10.6% Oman 6.4% Source: DAFF Figure 6

Australian mutton exports to MENA

Australian mutton

exports

The MENA region was Australia’s largest export market

for mutton in 2012.

 After three years of decline, exports of mutton increased in 2012, totalling 47,348 tonnes swt, up 19% on 2011 volumes. This corresponded with a 23% increase in Australian mutton production in 2012, and a decline in mutton prices from the record highs reached in 2011.

Saudi Arabia was Australia’s largest export market in

the MENA region in 2012, with shipments reaching 12,646 tonnes swt. This was followed by the UAE (11,126 tonnes swt), Bahrain (6,318 tonnes swt) and Kuwait (5,758 tonnes swt).

 After a tumultuous year in 2011, mutton exports to Egypt rebounded in 2012, to 3,437 tonnes swt, up from a low of 528 tonnes in 2011. Shipments to Libya also recovered somewhat after falling to 26 tonnes in 2011, back up to 353 tonnes swt in 2012.

Cut composition was dominated by mutton carcase,

accounting for 61% of all shipments, while leg (19%) and manufacturing (6%) were also exported in large quantities.

Oil- A key determinant of wealth

Although economic growth throughout the MENA region was strong in 2012, resource endowments and political stability vary significantly between countries. Oil is a key determinant of wealth, and economic prospects vary significantly from nations that are large oil exporters, and those nations that are net oil importers. Countries within the MENA region can be broken into two distinct economic groups, ‘oil exporting’ nations and ‘oil importing’ nations, as detailed in the International Monetary Fund’s (IMF) November 2012 ‘Middle East and Central Asia Regional Economic Outlook’. Average GDP per capita in ‘oil exporting’ nations within the MENA region in 2012 stood at US$24,410. This compares to an average of US$3,349 in ‘oil importing’ nations, clearly indicating the wealth disparity within the region and the distinct difference in wealth between ‘oil exporters’ and ‘oil importers’ (IMF).

Figure 7

Australian mutton exports to MENA by cut

Carcase 57.1% Leg 22.0% Manufacturing 7.6% Shoulder 6.8% Other 4.7% Bone-in loin 1.7% Carcase 60.6% Leg 18.6% Manufacturing 6.4% Shoulder 4.1% Other 6.7% Bone-in loin 3.6% 2007 51,046 tonnes swt 2011 39,699 tonnes swt 2012 47,358 tonnes swt Source: DAFF Carcase 57.5% Leg 18.6% Manufacturing10.5% Shoulder 4.9% Other 5.9% Bone-in loin 2.7%

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With recent high oil prices, those countries with oil have been able to post, in most cases, strong economic growth, even in times of economic uncertainty around the globe. With oil prices forecast to remain high in the short term, nations with high oil production should see continued high returns, bolstering of government revenues. Overall economic growth for MENA oil exporting nations is forecast at close to 4% by the IMF for 2013.

Conversely, high oil prices can have the opposite impact on ‘oil importers’. An increase in oil prices means higher prices paid for imports, damaging balance of payment figures in oil importing nations. High food prices also have a similar impact, forcing importers to pay higher amounts for imports. Importantly, as many ‘oil importer’ governments within the region subsidies both fuel and food consumption, any increase in prices will serve to increase subsidy payments, therefore, damaging government balance sheets. Growth forecasts for MENA ‘oil importers’ is 3% for 2013 (IMF).

Australia’s top two red meat markets in 2012, the UAE and Saudi Arabia, are both ‘oil exporters’, with large proven oil reserves. Jordan, Australia’s third largest market, on the other hand, is classified as an ‘oil importer’.

Oil exporters – Fiscal breakeven oil prices

Government expenditure has grown significantly in recent years in MENA ‘oil exporters’ on the back of high oil prices as governments have increased wages, social expenditure and infrastructure investment. This has effectively created a situation in which the oil price that governments need to ensure that their budgets are not in deficit, the oil break-even price, has increased.

If oil prices where to decrease below this oil break-even price for a significant period of time, this would place strain on government budgets, most likely resulting in reduced expenditure. This would consequently have a negative effect on economic growth, as government injections into the economy slowed.

Therefore, it is important to know this oil break-even price for Australia’s large red meat markets in the region. If the price of oil is above this break-even price, then it can be assumed that governments are not under significant budgetary pressure, and have the ability to inject stimulus into their economies to drive economic growth.

2007 2008 2009 2010 2011 2012 2013 Algeria - 73.3 74.8 82.0 104.7 117.9 99.5 Bahrain 65.5 79.7 82.5 102.7 113.9 118.2 111.4 Iran 81.0 65.0 76.0 107.0 134.0 150.0 Iraq - 111.4 72.3 90.0 95.0 112.0 94.1 Kuwait - 33.0 28.0 45.9 44.4 49.0 56.4 Libya - 46.6 68.2 57.7 183.5 88.5 98.8 Oman 42.1 61.7 61.1 66.6 77.9 81.3 83.3 Qatar - 24.2 25.0 24.0 38.0 40.4 68.0 Saudi Arabia - 37.6 73.6 67.5 77.0 74.4 85.2 UAE - 23.4 61.0 86.5 92.4 79.0 77.5 Yemen - - 138.0 130.0 195.0 237.0 -Source: IMF

Fiscal Breakeven oil prices ($US per barrel)

Projections Table 1

Fiscal breakeven oil price ($US per barrel)

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MLA Market Information

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Australian beef exports to MENA

Source: DAFF and MLA forecast

04' 05' 06' 07' 08' 09' 10' 11' 12' 13f 0 10 20 30 40 '000 tonnes swt

Chilled Frozen Forecast

Figure 8 f = forecast Source: DAFF Figure 9 04' 05' 06' 07' 08' 09' 10' 11' 12' 0 5 10 15 20 25 30 35 40 '000 tonnes swt grassfed grainfed

Australian beef exports to MENA

Australian beef and veal exports

Australian beef exports to MENA declined 5% year-on-year in 2012, to total 32,737

tonnes swt. Although declining, beef exports were still well above the five year average of 18,974 tonnes swt.

 The UAE was Australia’s largest beef market in the region in 2012, with shipments totalling 7,640 tonnes swt. Other key markets in the region include Jordan (6,012 tonnes swt), Saudi Arabia (5,241 tonnes swt) and Iran (3,421 tonnes swt).

Egypt and Iran both experienced strong growth in 2012, after a tumultuous year in

2011, with beef shipments increasing 96% and 90%, respectively.

Conversely, exports to Kuwait and Lebanon declined year-on-year in 2012, after a

strong year in 2011. Shipments to Kuwait declined 38%, totalling 2,263 tonnes, while exports to Lebanon were down 65%, to 803 tonnes swt.

 Chilled beef exports avoided the overall decline in beef shipments, remaining steady on 2011 levels at 9,178 tonnes. This reflects the strength of the retail and high-end foodservice sector for Australian chilled primal cuts. Frozen exports experienced the decline, back 6%, with manufacturing shipments declining 32%, to 8,275 tonnes swt, while topside/inside exports were down 7%, to 5,899 tonnes swt.

 The cut composition to Australia’s largest market, the UAE, was dominated by exports of manufacturing beef (23%) and topside/inside (23%). Importantly, exports of Australian loin cuts remained robust. Tenderloin exports increased 7% to 508 tonnes swt, cube roll/rib eye roll shipments increased 12% to 388 tonnes swt, while striploin exports were down slightly, back 10% to 670 tonnes swt.

Grainfed exports increased 40%, to total 5,299 tonnes

swt. Topside/inside was the dominant grainfed cut exported, at 1913 tonnes swt, followed by thick flank/ knuckle (1,200 tonnes). Both these cuts are used chilled at retail, while are exported frozen for further processing into burgers. Manufacturing grainfed exports increased eight-fold, totalling 859 tonnes, with the majority of these trimmings being used in the manufacturing of burgers. In particular, demand for Angus burgers has led to an increase in the demand for Angus beef trimmings. Manufacturing 24.5% Topside/Inside 9.1% Carcase 2.0% Thick Flank/Knuckle 4.8% Silverside/Outside 7.0% Striploin 11.0% Other 41.6% Manufacturing 25. 3% Top sid e/Insid e

18. 0%

Carcase 17.5%

Thick Flank/Knuckle 7. 9%

Silversid e/O utsid e 4. 1% Strip loin 3.5% O ther 23.7% Figure 10

Australian beef exports to MENA by cut 2007 4,458 tonnes swt 2011 34,310 tonnes swt 2012 32,737 tonnes swt Manufacturing 35.5% Topside/Inside 18.5% Carcase 11.9% Thick Flank/Knuckle 8.0% Silverside/Outside 3.9% Striploin 3.5% Other 18.7%

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Competitor update

Import statistics covering the MENA region are sparse, so it is beneficial to look at

the export statistics of Australia’s largest sheepmeat and beef competitors to ascertain the competitive environment Australia faces in the region.

Sheepmeat

New Zealand

New Zealand (NZ) exported 40,800 tonnes of lamb to the MENA region in 2012, a

49% increase year-on-year (Global Trade Atlas). NZ’s major market for lamb, the EU, continued to suffer from economic hardship throughout 2012, with NZ lamb exports consequently redirected into alternate markets, particularly the Middle East. Although increasing substantially, this growth was roughly in line with Australia’s growth in exports to MENA in 2012 of 55%.

 Interestingly, NZ supplies a slightly different market segment in the region. NZ’s largest market in MENA was Saudi Arabia in 2012, with shipments totalling 18,263 tonnes, followed by Jordan (12,468 tonnes). Although Jordan is a large market for Australian lamb exports (12,959 tonnes swt), Australian exports to Saudi Arabia only totalled 3,974 tonnes.

NZ’s dominance in Saudi Arabia can be attributed in some part to their use of gas

flushing when packing product. Gas flushed product has an expiry of 90 days after slaughter in Saudi Arabia, as compared to 70 days for vacuum packed chilled product (Australia’s dominant packing method). This allows NZ to seafreight product to the market with a reasonable shelf life on arrival, giving them an advantage in the market.

 NZ lamb exports to Australia’s largest market, the UAE (13,205 tonnes swt in 2012), only totalled 1,432 tonnes in 2012.

Although Australia and NZ lamb exports compete very evenly in Jordan, it appears

that in each other’s top market in the region, market share is dominated by the incumbent.

 NZ lamb exports to Jordan increased substantially in 2012, up almost two-fold year-on-year. NZ product destined for Jordan in some cases is gas flushed, which is preferred by some Jordanian importers.

India

 Indian lamb exports grew 20% in 2012, totalling 1,348 tonnes swt. Mutton exports pose greater competition to Australian product, with Indian mutton shipments totalling 10,593 tonnes in 2012, growth of 15% year-on-year (GTA). Although these are the offical figures, there seems to be large amounts of Indian product in the market.

Live sheep

 Australian live sheep exports, which are almost exclusively destined for the Middle East, have been restricted in recent years by a declining national flock and market access restrictions into major markets. Australian live sheep exports were the lowest on record in 2012, totalling 2.279 million head.

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MLA Market Information

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Beef

India

 India was the largest supplier of beef to the region, with shipments totalling 431,069 tonnes in 2012, an increase of 9% year-on-year. Indian beef (buffalo) meat is a low cost product and is largely destined for the frozen manufacturing sector. As Indian packaging and processing standards improve, an increasing amount of Indian chilled product is reaching the market, although this is still competing in the lower end retail and foodservice sectors.

Brazil

 Brazil was the second largest supplier of beef into the region, with exports totalling 331,313 tonnes in 2012, a slight increase on 2011 shipments. Brazilian beef largely competes with Australian beef at both the frozen manufacturing level and into the mid-level retail and foodservice markets. Importantly, market access restrictions were placed on Brazil in numerous countries across the region after the discovery of an atypical case of BSE in late 2012. Saudi Arabia b a n n e d a l l B r a z i l i a n b e e f i m p o r t s , w i t h opportunities opening up in 2013 for Australian beef to supply some of the gap left in the market.

US

US beef competes with Australian beef in the

higher market segments, particularly into high end foodservice and to a lesser extent, chilled retail. US beef exports fell 25% in 2012, as a reduction in US beef production affected the volumes exported to the region, with a ban on US beef imports in Saudi Arabia in mid-2012 due to the discovery of BSE also contributing to the decline in volumes.

2012 tonnage 2011 tonnage Net tonnage

change % change India 431,089 396,444 34,645 9% Brazil 331,313 327,238 4,075 -EU 62,849 145,646 -82,797 -57% U S 43,881 58,584 -14,703 -25% Australia 32,737 34,310 -1,573 -5% Argentina 22,830 29,854 -7,024 -24% U ruguay 24,302 15,897 8,405 53% N Z 8,738 9,242 -504 -C hina 4,791 10,105 -5,314 -53% Paraguay 9,835 10,158 -323 -3% C anada 1,682 2,732 -1,050 -38% TOTAL 974,047 1,040,210 -66,163 7%

Source: Department of Agriculture, Fisheries and Forestry

Beef

2012 tonnage 2011 tonnage Net tonnage

change % change Australia 55,076 35,643 19,433 55% NZ 40,800 27,404 13,396 49% EU 825 1,268 -443 -35% India 1,348 1,128 220 20% TOTAL 98,049 65,443 32,606 -33%

Source: Department of Agriculture, Fisheries and Forestry

Lamb

Table 2

Lamb competitor update

Table 3

Mutton competitor update

2012 tonnage 2011 tonnage Net tonnage

change % change Australia 47,348 39,699 7,649 19% India 10,593 9,172 1,421 15% NZ 3,916 7,029 -3,113 -44% EU 1,616 1,227 389 32% China 481 1,396 -915 -66% TOTAL 63,473 57,127 6,346 -10%

Source: Department of Agriculture, Fisheries and Forestry

Mutton

Table 4

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Beef into Saudi Arabia – 2013 a strong year?

Australian beef exports to the Middle East (excluding North Africa) hit their highest ever monthly total in February 2013, totalling 5,463 tonnes swt. A surge in shipments to Saudi Arabia contributed to the record volumes, with Saudi Arabia alone taking 2,512 tonnes swt. A ban on Brazilian beef in Saudi Arabia in late 2012 has created a gap in the market, with this contributing to the increased volumes sent in early 2013.

With such a strong start to 2013 into Saudi Arabia, a background on the country seems appropriate, to provide insight into further opportunities for Australian red meat into the Kingdom.

Nature of Australian exports

Saudi Arabia was historically Australia’s largest red meat market in the MENA region, before the UAE claimed the title in 2009. Historically a large market for Australian mutton, volumes to the country slowed with the reduction in Australian mutton production from 2010 onwards. Red meat shipments totalled 21,861 tonnes swt in 2012, 1% above 2011 exports. Exports to the country peaked in 2006, at 28,083 tonnes swt.

Although beef exports were down 13% in 2012 on 2011 levels, at 5,241 tonnes swt, this was 55% above the five year average. Beef accounted for 24% of Australian red meat shipments to Saudi Arabia in 2012, with lamb exports making up 18% and mutton exports 58%.

Beef exports to Saudi Arabia were dominated by shipments of frozen product, with 96% of all exports frozen in 2012. Manufacturing exports make up the majority of shipments, accounting for 56% of all exports, followed by carcase (20%) and topside/inside (6%). The market for chilled product in Saudi Arabia is rather small, at 204 tonnes swt in 2012.

Importantly, in 2013 (Jan-Feb) there has been phenomenal growth in Australian chilled shipments to Saudi Arabia, with chilled shipments for the first two months of 2013 up more than four-fold on total 2012 exports, reaching 873 tonnes swt for January and February alone. The first two months of 2013 has seen total beef exports increase more than eight-fold when compared year-on-year.

Market access requirements

Quotas and Tariffs

 There are no quotas for Saudi Arabia. There is no tariff on chilled product, 5% tariff on frozen product, offal and processed meat.

Shelf life

 The shelf life for vacuum packed meat is no more than 70 days from the date of slaughter, while for vacuum packed offal it is no more than 51 days.

 Frozen meat (all types) has an expiry date of no more than 12 months after slaughter.

 Gas Flushed lamb has an expiry date of no more than 90 days after slaughter.

 Entry date requirements apply for the market. They are:

 Vacuum packed meat (all), the product must enter no more than 40 days after slaughter date.

Frozen meat, product must enter no more than 4 months from the date of slaughter. Frozen offal (6 months), brain and testes (4 months) and liver (9 months).

Halal requirements

Halal slaughter is required for product destined for Saudi Arabia.

GMO Free

 All meat products to Saudi Arabia must be from free GMO and genetically modified feedstuffs.

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MLA Market Information

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Saudi Arabia’s food consumption on the up

The latest Business Monitor International (BMI) report on food and drink in Saudi Arabia paints a positive outlook for growth in food consumption in the country. Strong economic growth within Saudi Arabia, forecast at 4.5% in 2013, driven by high oil prices and continued high government spending, is forecast to drive household expenditure and subsequently food consumption upwards. Food consumption growth is forecast at 9.75% in 2013, while out to 2017 growth is forecast at 53.3%.

The report places Saudi Arabia at the top of BMI’s ‘risk/rewards ratings’ for the MENA region, indicating the good opportunity for investment in the food sector and for growth in food consumption. Although consumers in Saudi Arabia do not spend as much per capita as those in the UAE, Australia’s largest market for red meat in the MENA region in 2012, it offers better opportunities for long term growth, particularly food consumption, according to the BMI report. A large population of 28 million, the biggest in the Gulf Cooperation Council (GCC), provides a large consumer base. Importantly, the population is not only large, but also young, with roughly half the population younger than 25. Combined with good prospects for economic growth in the coming years, the potential exists for Saudi Arabia to act as a growing market for Australian red meat.

Economic Outlook

The IMF has estimated growth of 6% in 2012 and is forecasting growth of 4.2% in 2013. High levels of government spending, particularly since the beginning of 2011, and continued expansion of the private sector are driving the strong economic growth.

High oil revenues have allowed the government to increase expenditure while still keeping the budget in surplus and maintaining levels of foreign reserves. In 2011, the government embarked on numerous new social programs, in an attempt to boost growth and ensure that social dissent around the MENA region did not spread to Saudi Arabia. A host of programs to deal with youth unemployment headlines these social initiatives. Combined with large scale education and healthcare programs, government spending has contributed significantly to the domestic economy in recent years. It is forecast by BMI that government expenditure will contribute 2.1% and 1% to GDP in 2012 and 2013, respectively, illustrating the importance of strong government expenditure to the economy.

Political Risk

The political situation in Saudi Arabia remains stable, however, social tensions do exists. The Kingdom of Saudi Arabia is a traditional monarchy, with the current King, King Abdullah, succeeding to the thrown on 1 August 2005, following the death of his brother (Australian Department of Foreign Affairs and Trade, DFAT).

The current ruling family, the House of Saud, will face internal complications as the current first generation heirs to the thrown suffer from ill health or pass away, however, there is little threat to the families grip on power. The regime has talked about political change following the Arab awakening, however, political parties remain illegal (DFAT).

With the onset of the Arab Spring in 2011, Saudi Arabia drastically increased government spending, in what was seen by many as an attempt to shore up political stability through increasing the wealth of the population. These subsidy packages totalled US$130bn, comprised of wage hikes for civil servants, housing and unemployment benefits and infrastructure spending (BMI).

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Beef into Saudi Arabia – 2013 a

strong year? (continued)

S a u d i A r a b i a h a s b e e n r a n k e d b y Freedom House, along with Equatorial Guinea and North Korea, as one of the world’s least free nations. Although relations between the ruling Monarchy and its people appears strained, risk of political upheaval appears remote.

Summary

Record beef exports to Saudi Arabia in January and February 2013 indicate that Saudi Arabia is a growing destination for Australian beef exports. The ban on Brazilian beef put in place in late 2012 has opened opportunities for Australian beef and contributed to the strong start to 2013. However, such an opening should provide strong links with the Saudi trade that can be capitalised in the future, even as market access restrictions on Brazil are eased. Australian beef exports to Saudi Arabia

Source: DAFF 04' 05' 06' 07' 08' 09' 10' 11' 12' 13 ' 0 1 2 3 4 5 6 7 '000 tonnes swt Chilled Frozen Figure 11

note: 2013 includes only January and February figures

Australian beef exports to Saudi Arabia (Jan-Feb)

Source: DAFF 04' 05' 06' 07' 08' 09' 10' 11' 12' 13 ' 0 1 2 3 4 '000 tonnes swt Chilled Frozen Figure 12

Regional forecasts

Population growth continues at a fast pace across the MENA region. Among Gulf

Cooperation Council (GCC) countries, population growth from 2012 to 2015 is forecast by the IMF at 7%, with the total population reaching over 47 million people in 2015.

 Outside of the GCC, population growth in large Australian red meat markets is also predicted to be positive. Egypt (6% growth), Iran (4%) and Jordan (7%) are all forecast to see strong population growth out to 2015.

 Egypt, behind Pakistan (187 million people) and Nigeria (155 million people) is the third largest country in the MENA region, with a population of 80 million people. As a significant meat importer, the large and growing population in Egypt should signify the potential of the Egyptian market for Australian red meat exports. Political upheaval and difficult technical standards have meant that Australian shipments have been restricted in recent years, however, potential still exists.

 Beef consumption in MENA is forecast to expand by 314,000 tonnes cwt (209,000 tonnes boneless) between 2010 and 2015 (see MLA paper Forecast growth in Australian beef exports by major market 2010-2015, P.Barnard and P.Weeks, January 2011).

 MLA forecasts that Australian beef and veal exports to the Middle East (excluding North Africa) will total 35,000 tonnes swt in 2013, an increase of 12% year-on-year (MLA beef industry projections 2013). Despite the growth in Indian beef exports to the region, strong indications of continued demand from Australia’s large markets looks set to drive the growth in Australian beef shipments.

 Lamb exports to the Middle East (excluding North Africa) are forecast by MLA to grow 6% in 2013, to 55,000 tonnes swt (MLA sheep industry projections 2013).

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MLA Market Information

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© Meat & Livestock Australia, 2013. ABN 39 081 678 364.

MLA makes no representations as to the accuracy of any information or advice contained in Red Meat Market Report and excludes all liability, whether in contract, tort (including negligence or breach of statutory duty) or otherwise as a result of reliance by any person on such information or advice.

Free to MLA members For further information

please call toll free 1800 023 100 or 02 9463 9163 or fax 02 9954 0752 Also available on www.mla.com.au

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References

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