July 6 (Bloomberg) -- Australian beef exports to Japan, the world's second-largest buyer of the meat, surged 70 percent to a record in June as Aeon Co. and other Japanese retailers increased orders to plug a shortage caused by bans on U.S. beef.

Teys Bros., Stockyard Pty and other exporters shipped 39,833 metric tons of the meat to Japan last month, compared with 23,427 tons in June 2003, Australia's Agriculture Department in Canberra said in a report. Exports were 24 percent higher than in May.

Australia, the world's top beef exporter, is benefiting from bans on U.S. beef in Japan, South Korea and at least 38 other countries following the discovery in December of one case of mad cow disease in a Washington state herd. Increased demand for Australian beef and a drought-induced drop in livestock numbers have pushed cattle prices to the highest in more than two years.

``Since December last year, we've bought more Australian beef and will continue to buy more,'' said Naoko Ueda, a spokeswoman for Aeon Co., Japan's largest retailer. The Chiba prefecture-based company sources 45 percent of its beef from Australia, compared with 35 percent before the ban on U.S. beef. Domestic producers supply the remainder of Aeon's needs.

Japan is the biggest buyer of Australian beef by value. Australia shipped 110 billion yen ($1 billion) of the meat to Japan last year, accounting for 44 percent of the country's imports. Export volumes surged 38 percent in the six months ended June 30, the Agriculture Department said.

Not Meeting Demand

``Australia is probably the only country that can provide Japan with the sort of product that's fairly comparable with what the U.S. had been supplying,'' Don Mackay, chief executive of Brisbane-based Australian Agricultural Co., the world's biggest cattle rancher, said in an interview. Still, a decline in the availability of cattle means that ``Australia wouldn't be completely meeting the demand in Japan,'' he said.

Beef is Australia's biggest farm export after wheat. In May, exports of the red meat totaled A$423 million ($301 million), the most in a month since October 2001.

``Demand for Australian beef in Japan has been heightened in 2004, due to the absence of U.S. and Canadian beef from the market, combined with tight supply of chicken and higher pork prices,'' said David Crombie, chairman of Sydney-based trade group Meat & Livestock Australia, in an e-mailed statement.

Prices on Australia's benchmark Eastern Young Cattle Indicator rose 1 cent, or 0.3 percent, yesterday to $3.58 a kilogram -- the highest since Dec. 20, 2001. Prices have gained 8 percent in the past month after as much as 200 millimeters (7.9 inches) of rain fell across parts of New South Wales and Victoria states in June, boosting pasture supply and prompting ranchers to withhold livestock from sale to increase their herds.

Drought

The national herd is estimated to have declined to a nine- year low of 26 million head as of June 30 because of forced cattle sales and livestock deaths caused by the country's worst drought in 100 years. Rain in the past three months has eased the drought and reduced pressure on ranchers to sell livestock.

The number of cows and heifers slaughtered in Australia fell 6.2 percent in May from a year earlier and has declined in nine out of the past 10 months.

``Cattle supply has tightened up largely as a result of rain in southern Australia,'' said Malcolm Foster, managing director of Rangers Valley Cattle, an Australian cattle-fattening farm owned by Japan's Marubeni Corp. Farmers ``are sitting on the cattle, as you would expect them to, and that's driven the price up.''

The U.S. is the world's largest importer of beef by volume, according to the Australian Bureau of Agricultural & Resource Economics.

To contact the reporter on this story: Jason Gale in Melbourne at j.gale@bloomberg.net.

Last Updated: July 6, 2004 03:25 EDT