SALES are down, but things will get better, writes livestock editor KATE DOWLER

It has been a very tough start to the year for Australia's beef industry.

However, the economic downturn and poor outlook for several major markets comes on the back of record-breaking sales last year.

Australia's beef industry sold $4.67 billion worth of beef exports last year and exported $644 million worth of live cattle.

These figures were 11 per cent and 24 per cent respectively up on prior records.

But according to Meat and Livestock Australia chief market analyst Peter Weeks, the Australian dollar's low standing against other currencies is likely to be the industry's saving grace.

"Our view is that, as the year goes on, conditions will improve, particularly by mid-year," he said.

"The dollar will principally offset any fall in consumption worldwide.

"There is no denying overall beef consumption is likely to be down.

"The fact that our product is now much cheaper, because of the low dollar, will ensure we still have high sales, despite the economic problems."

Markets worst affected by the economic woes have so far been Korea - a major destination for Australian meat - and Russia.

But Australian exports to the US and Japan were tipped to increase in volume and value.

In the US, our most important export market in terms of volume and value, exports were expected to lift by 40 per cent this year, thanks largely to increased demand for grinding beef for the fast-food market.

Mr Weeks said a lack of credit continued to hamper trade, but there were some positive signs coming out of Korea and Japan.

"There are also some orders for South American beef coming from Russia," he said.

This was a positive for Australia, he said, because South American meat had been flooding into more lucrative markets during Russia's absence from the trade.

Australia now exports less to the Philippines and Hong Kong because of the abundance of cheaper South American product on the market.

Australia exported 80,000 tonnes of beef to Russia last year, but the credit crisis has led MLA to say only 30,000 tonnes will go this year.

"In March-April, we hope things will improve more," Mr Weeks said.

However, trading conditions would never be the same again, he said.

Many traders have gone broke, so new relationships will need to be built.

Importers will also pay for more product up front, rather than seek credit.

And traders will hold much less stock, which will lead to more price and demand volatility.

"This does make life more difficult for exporters and there will be many fewer forward contracts," Mr Weeks said.

"They are not in the position to hold stocks either, so it is going to be a difficult environment to trade in."

However, the live export trade remained strong and buoyant, Mr Weeks said, thanks to the more stable, direct relationships this industry was built on.

And Indonesia, one of the biggest markets, still has a growing economy.

"There's no sign of this trade weakening," he said.

But the availability of cattle from northern Australia was a concern, following drought in the Northern Territory and floods in Queensland.

Overall, MLA predicts beef production to lift by 2 per cent and exports by 3 per cent.

"The low Australian dollar should also, eventually, increase the value as well, though we're not seeing this yet," Mr Weeks said.