Australia’s largest beef producer says the impact of the temporary suspension of live cattle exports to Indonesia in 2011 and drought led to a $31.6 million half-year loss.

Australian Agricultural Company (AACo) says domestic cattle prices slumped because of the live exports suspension and a very bad drought in northern Australia.

Although AACo sold 17 per cent more cattle in the six months to the end of September than in the prior corresponding period, prices for live cattle fell 12 per cent in that time, contributing to a $20.4 million drop in revenue from live cattle sales.

“The external conditions in which we operate continue to be challenging,” acting chief executive Craig White said on Thursday.

“The flow-on effects of the former federal government’s 2011 suspension of the live export trade to Indonesia has meant a surplus of cattle in the domestic market, resulting in lower domestic prices.

“Compounding that has been the drought that is severely affecting northern Australia this year.”

Some areas where AACo owns properties experienced their lowest rainfall on record, which forced more cattle into the saleyards, further lowering prices.

The poor result from live cattle operations was partly offset by a strong performance from AACo’s beef division, which improved its profit margins by targeting higher value customers.

The beef division produces wagyu, grass and grain fed beef for restaurants and retailers, and exports to more than 20 countries.

Mr White said recent diplomatic moves by the new federal government pointed to a possible improvement in live export trading conditions with Indonesia.

“We’re not quite there yet in terms of the trade freely flowing, but I think all the signs are extremely positive,” he said.

AACo made a net loss of $31.6 million in the six months to September, compared to a loss of $18.6 million in the prior corresponding period.

The company is in the process of transforming itself from a pure pastoral company into an integrated producer, processor and marketer of beef.

It is building an abattoir, processing and packaging facility in Darwin.

AACo hopes the new facility will enable it to take advantage of the rising global demand for beef, especially in Asia, and reduce the volatility in the group’s earnings.

Mr White said the abattoir and live export business would complement each other because the beef processing facility would use different types of cattle to those suitable for live export.

Shares in AACo closed steady at $1.125.