BEEF FORECAST
MLA beef projections: Get in quick for good money while it lasts
THE clock is ticking on making record money out of cattle.
The latest industry update issued by Meat and Livestock Australia this week is blunt in its assessment of this year being the peak of the market before changes to Australian cattle supply and softer global beef demand impacts prices.
Ben Thomas, MLA manager of market information services, said the boom period was coming to a close.
“The start to the year has set up positive expectations for the remainder of 2017, especially given the prices recorded in early 2016 were the highest for that period and have now been exceeded,” he 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 cannot last.’’
Six months from now takes the industry into October or the traditional spring flush.
But before farmers have heart palpitations over these statements, it is worth noting that no one is predicting a massive or sudden price correction for cattle.
Probably the best analysis done in recent times looked at US cattle prices through its drought decline and herd rebuilding phase.
It found that after US prices peaked at record levels, it took 15 months for values to bottom out before stabilising at a stronger base.
If the Australian market were to mirror the American performance – and many analysts believe it might –
prices could settle 20–40% below current highs.
There is little talk of beef prices going back to the pre-drought days of less than 200c/kg liveweight.
With this in mind, this week’s MLA projections update is probably more helpful in giving producers some timelines and trends to consider when looking at marketing or finishing options for the cattle they have.
The next six months is being viewed as the best window for selling, but this could be variable based on seasonal conditions, particularly in regards to young store animals.
While there has been some good storm rainfall nationally, much of inland Queensland remains drought-declared and the Bureau of Meteorology is still suggesting low odds for average rainfall in Victoria this autumn.
But looking at the big picture, MLA believes cattle supply will start to gather pace from spring onwards as the progeny of more retained females start to enter the production chain.
Mr Thomas said the number of female cattle in the total adult cattle kill fell to just 42% in the three-month period November to January – the lowest percentage ever recorded. Traditionally female cattle account for 50% or more of the adult slaughter.
“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 current low fodder and grain prices to carry stock through,” he said.
The other impact of more feed, fewer numbers and fewer cows being slaughtered, is higher carcase weights.
The Australian Bureau of Statistics says the average carcase weight for slaughter cattle from October to January
was more than 290kg, the biggest summer weight on record. MLA has now officially lifted its forecast for carcase weights by 1%.
There could be some opportunity in this for producers with young cattle that can meet the lower niche kill weights for butchers and some domestic orders (about 180–240kg carcase weight).
Referring back to the six-month timeframe, the pressure is probably more on heavier export cattle as these are the categories most likely to experience a price correction first.
There is usually some lag-time before the store market reacts to lower prices for prime beef, which should give the young cattle market some protection.
The start to the year has set up positive expectations...
— MLA market information services manager Ben Thomas