Australian cattle exporters have been insulated from surging production in the United States by tight domestic supply, according to a report from National Australia Bank.

Space to play or pause, M to mute, left and right arrows to seek, up and down arrows for volume. Listen Duration: 4 minutes 45 seconds 4 m 45 s Kallee Buchanan discusses the beef In Focus report with agribusiness economist Phin Ziebell Download 2.2 MB

The march Commodity In Focus report on beef predicts prices at saleyards will remain high in 2016, but pressure from the recovering US herd will start to push volumes lower.

Agribusiness economist Phin Ziebell said exporters, processors and feedlots were likely to feel it first.

"What you see happening already in the industry is volumes have already come off , we simply don't have the stock anymore to slaughter; we've slaughtered so many and people are looking to rebuild herds," he said.

"At the same time the US cattle herd is starting to recover from some very low levels and the price of beef in the US and prices of cattle in the US have come off quite significantly.

"So on the export front we're now transitioning to a lower volume and lower export price market."

The shift, he said, was starting to be felt in the domestic market, with heavier slaughter-ready cattle prices easing while re-stocker prices remained strong.

"You're seeing that a lot, you're also seeing lower volumes, you're seeing more males sent to processors and what we're seeing is some positive indications that people are looking to rebuild herds," he said.

"But the reality is that on the international front what we're looking at is a lower volume story and also potentially a lower price story in the coming years."

In Focus: Beef Highlights Prices are set to finish this financial year 45 per cent above the previous year, and are only expected to weaken by 1.7 per cent in 2016-17.

Prices are set to finish this financial year 45 per cent above the previous year, and are only expected to weaken by 1.7 per cent in 2016-17. Beef production was down 9 per cent in 2015-16 year on year and is forecast to fall a further 6.6 per cent in 2016-17

Beef production was down 9 per cent in 2015-16 year on year and is forecast to fall a further 6.6 per cent in 2016-17 Export earnings are tipped to fall 10 per cent in 2016-17

Export earnings are tipped to fall 10 per cent in 2016-17 Australian dollar expected to fall below 70 US cents in the second half of this year, reaching a low of 67 US cents before climbing in 2017.

He said the strength of cattle prices in the medium term would be partly reliant on international prices, but also on domestic climatic conditions.

'We know up north in the Top End it's been quite dry ... there was some welcome rains in parts of Queensland in January but then it sort of dried out a little bit over much of the east coast in the past month or two," he said.

"The real question mark I think, coming into this year, is how well is that demand for re-stocker cattle going to be supported by fundamentals on the ground on a farm level?

"The lack of supply now and the need to rebuild because the herd has been so depleted are keeping prices higher ... but I think ultimately what you see is that export prices are reflected at the saleyard level eventually.

"So when we look beyond this year ... there's certainly going to be some pressure on prices because in reality the supply picture out of the US is looking a lot better."

Ultimately Mr Ziebell said Australian producers needed to be focussed on restocking and redeveloping the herd while preparing for prices to soften.

"If you've been able to keep stock and not been forced to destock because of drought conditions and you've been able to sell into that market, you've done exceptionally well," he said.

"If you're a processor and you've been able to sell out to the US because of their demand for lean Australian beef over the past couple of years you've done exceptionally well.

"Now as we look to the next couple of years, the question will be how are you going to manage your herds, how are you going to restock effectively and also how are you going to be able to sell into that market and perhaps prepare for that price pressure down the track."