Cattle report points to strong prices
MLA has released the 2017 cattle market quarterly forecast, with a predicted carry over on year-on-year prices.
The big thing to come out is that the current cattle prices are expected to remain strong for 2017, but as the national herd rebuilds they are expected to dip heading into 2018.
The report also states that low female cattle slaughter and high carcase weights have set the scene for 2017, with these two components filtering through to influence the 2017 April Cattle Industry Projections.
MLA’s manager of market information services Ben Thomas said female cattle slaughter over the November 2016 to January 2017 period was the lowest proportion of the adult cattle kill ever.
“Given the low female slaughter figures, it confirms that the wheels are in motion for the national herd rebuild, with many producers likely to take advantage of the currently low fodder and grain prices to carry stock through,” Mr Thomas said.
“The average carcase weight for Australian cattle was the highest ever during the summer months – the result of a higher proportion of cattle on feed for longer, heavier grassfed cattle coming through the system, as well as the significant drop in female slaughter.
“The short-term impact is beef and veal production is now estimated to be 2.1 million tonnes cwt for 2017, down just one per cent year-on-year, rather than being down three per cent as originally forecast in January.”
Mr Thomas said after trending downwards from November 2016 to early March 2017, cattle prices received an injection of life from the widespread March rainfall, causing a significant rise across all categories.
While the January estimate of 7.1 million slaughtered head remains, much heavier carcases will go a long way to alleviating the constrained supply pressure, with the result being only a one per cent yearon-year decline in beef and veal production.
Mr Thomas predicts that, because of the autumn break in some larger cattle producing regions, expectations are for more stock to be withheld, while the dry conditions in southern Australia will result in slightly higher than expected turn-off than previously anticipated.
The average carcase weight for Australian cattle was the highest ever during the summer months – the result of a higher proportion of cattle on feed for longer regimes, heavier grass- fed cattle coming through the system, and a significant drop in female slaughter.
In fact, the most recent Australian Bureau of Statistics (ABS) data has average adult cattle carcase weights averaging over 290kg for the October to January period.
“There have been brief stages in the past, namely 2011, when the average weight edged above 290kg, but never for four consecutive months,” Mr Thomas said.
“Considering female cattle slaughter is expected to remain relatively low for the duration of 2017, and despite the potentially poor feed conditions for southern Australia during autumn and winter, the average adult carcase weight has been revised slightly higher, to 291kg for 2017.
“As the female component is expected to rise from 2018 onwards, average weights are likely to dip back to 288kg in 2018.”
After trending downwards from November 2016 to early March 2017, cattle prices received an injection of life from the widespread March rainfall, causing a significant rise across all categories.
National saleyard prices responded with heavy steers averaging 549¢/kg cwt for the first quarter, up 24¢ or five per cent higher than last year.
Similarly, medium cows averaged 16¢ (three per cent) higher, at 468¢/kg cwt, while trade steers were 622¢/kg cwt, up 52¢ (nine per cent) yearon-year.
“This start to the year sets up positive expectations for the remainder of 2017, especially considering the first quarter of 2016 was in fact the previous record high for the period – which has now been exceeded,” Mr Thomas said.
However, while the market outlook for the next six months remains positive for producers with cattle to sell, largely underpinned by the ongoing very tight cattle supply situation, it’s a scenario that will not last forever.
Constrained female cattle slaughter is likely to reflect herd recovery, with the infant stages of that being realised in the second half of 2017.
“Once numbers do start flowing through the system, it is highly likely that Australian cattle prices – from heavy steers through to young cattle – will feel the weight of the additional supplies, coupled with the generally softer global beef market conditions observed for most of 2016 and so far in 2017,” Mr Thomas said.
“Nevertheless, 2017 cattle prices will probably end up averaging very similar to the record levels of 2016, before trending downwards in 2018 and 2019.”
FORECAST RELEASED: The cattle industry quarterly report has been released by MLA Australia, pointing to strong prices, a strengthening national herd and heavier slaughter cattle.