Meat and Livestock Australia has released its latest quarterly update, which predicts a softening market
MEAT and Livestock Australia has released its quarterly prediction for the cattle market, and not surprisingly has pegged the market as one that will continue to soften.
A poor July to September rainfall outlook for southern Australia - following the dry autumn – along with a 20-year low cow and heifer slaughter rate and continued volatile global market activity have resulted in a market projection that is weaker than first thought.
The slowly building national cattle herd indicates the peak of the cattle price is likely now behind producers, and downward pressure will continue to slowly mount for the foreseeable future.
Despite this, Australian cattle prices are unlikely to drop back to pre-2013 levels, buoyed by some lingering re-stocker activity when pasture conditions eventually improve.
Interestingly, June 2017 marked a crossroads for the Australian beef industry.
Eastern states’ slaughter consistently tracked higher than year-ago levels for the first time in three years, while at the same time, cattle prices dropped below year-ago levels, also for the first time in three years.
These trends are likely to remain in place for the remainder of 2017, and have a significant impact on price and production expectations.
More specifically, cattle on feed remain at record high levels, with numbers across Australia in the March quarter in excess of one million head.
Contributing to the record high is a slower than usual turnoff rate - cattle being retained on feed for longer.
During the March quarter, the proportion of cattle marketed relative to the number on feed was 69 per cent, compared to the quarterly average of 75 per cent over the past three years.
This is a continuation of a trend that began in 2016, and is one that is likely to hold for the second half of 2017, and into 2018.
This should result in relatively strong feeder cattle buyer activity and reasonably high average carcase weights, even when female cattle slaughter is anticipated to return to more typical levels in 2018.
Slaughter numbers continue to confirm that re-stocking seems to be producers’ main goal for the coming year.
Australian female cattle slaughter for the year-to-April highlights not only the intent many producers have to replenish depleted herds, but also just how few cows and heifers exist nationally in the wake of several years of drought liquidation.
After four months of 2017, female cattle slaughter was just 973,000 head – the lowest since 1995 and representing 45 per cent of the overall adult kill, three percentage points below the 10-year average (48 per cent).
Despite pasture conditions deteriorating in some regions, and the poor rainfall outlook, expectations are for the female component of the cattle kill to remain below the 10-year average, simply due to limited availability and already relatively low stocking rates.
The adult cattle kill was 13 per cent below 2016 levels, at 2.16 million head, after the first four months of the year (lowest since 1995).
However, numbers processed across the eastern states recovered in June and are anticipated to remain above yearago levels for the rest of 2017.
A significant consequence of the low female cattle slaughter, combined with high numbers of cattle on feed, is that average carcase weights for the yearto-date were 296.3kg/head – a staggering 7.8kg (3 per cent) increase on the previous record set in 2012.
While low female cattle slaughter was a similarity between the two periods, pasture conditions were considerably better in 2012.
This meant that in 2012, the bulk of the weight was underpinned by heavy grass-fed cattle, as opposed to a greater proportion of grain finished beef this time.
Carcase weights are anticipated to reduce slightly as the year progresses, but stay above the long-term average for the remainder of 2017.
As a result of the increase in cattle slaughter, combined with heavier carcase weights, 2017 beef and veal production is now estimated to be 2.17 million tonnes cwt, up 2 per cent year-on-year.
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