Latest cattle market update

Australian cattle prices have run hard and fast through the past since the beginning of July, led higher by slaughter cattle categories, on a step change in as export demand for Australian beef as global beef prices approach record levels amid a sharp slowing in US beef production and changes to trade flows. 

The key driver remains the US market where beef demand has held at record levels. Slowing US domestic production as US herd rebuilding gathers strength has led to a surge in global import demand for Australian beef (Australian beef exports +17 per cent year to July). Exports to the US have been particularly strong for lean manufacturing beef (Australian beef exports to US +27 per cent). Both US fed cattle prices and manufacturing beef prices are at record levels with the US choice cut-out beef values rising counter seasonally as turnoff out of US feedlots starts to crimp.

US market key driver

It can’t be underestimated the key role the US market has played in the rise in global beef market returns and the lift in prices paid for local cattle. A couple of key factors:

• US retail beef prices have been well above last year’s levels (see chart below left)
• US cattle slaughter has fallen behind year ago levels (see chart below right)

The combination of increased US beef demand and lower supply has combined to lift global beef values to record levels.

The other key change that has affected our markets the past few months has been the virtual shutout of US beef exports to China as part of ongoing trade tensions between the US/China (Australian beef exports to China +51 per cent for year to July). This has seen a dramatic surge in Australian beef exports to China the past few months, which is underpinning strong demand for non-Hormonal Growth Promotant beef (HGP free).

The outlook for heavy steers and slaughter cows looks to remain positive into year’s end, particularly for cows where supplies will now start to tighten seasonally. A pickup in southern turnoff towards the end of spring will aid southern processors, however, many areas across the south are still lacking pasture growth and will need a kind Spring to allow increased supplies of finished stock.

The segment which has the most uncertain outlook is restocker cattle. Some restocker interest has driven prices for lighter cattle into the mid to high $5’s/kg lw, however, there has been a lack of conviction and restocker prices and activity has flattened a little in recent weeks. This is tied to lack of seasonal confidence and feed reserves across the south with producers cautious about paying inflated prices for restocker cattle and running out of feed to finish them to market weights. So, the direction of restocker cattle values will remain relatively uncertain until the southern season has shown its hand.

But apart from concerns about the southern season and the impact on the restocker cattle market, most other indications point to a positive period for Australian cattle prices. The main risk would be a sharp contraction in US demand for beef as US domestic policy uncertainty leads to an about face on consumer spending. But countering this, the global economy seems to has escaped relatively unscathed for now from headwinds created by gyrations in US trade policies.

Heavy cattle availability tightens forcing prices higher

Sharply lower US fed beef slaughter and a pickup in Chinere demand for Australian beef has increased demand for heavy steers through the past 6 weeks. US fed beef prices have risen counter seasonally, while US beef production has slipped creating increased opportunities for Australian beef in global export markets.

US fed cattle slaughter last week was 12 per cent lower than a year ago and for the past three weeks, fed cattle slaughter has been under 440,000 head vs 2024 average of +500,000 head/week.

Strong processing margins has seen increased competition for slaughter suitable stock which has led to a general appreciation in Australian heavy steer values.

Provided US beef demand holds, the outlook for heavy steer prices remains positive. Supplies should gently increase through the next month or two as the northern season starts to unwind and turnoff of heavier slaughter cattle picks up seasonally towards year’s end.

Cows boast best price prospects

Global manufacturing beef prices continue to hold at record levels, underpinned by strong global beef demand and lower US production. There are signs that US herd rebuilding is picking up pace which will lead to further reductions in US cow slaughter (US domestic lean beef supply) and increased demand for imported lean beef.

Trump’s 50 per cent tariff increase on US Brazilian beef imports has the potential to lead to a further rise in US demand for Australian lean beef in coming months. This year, Brazil has overtaken Australian as the largest exporter to the US. Brazilian beef, which accounted for a quarter of all beef imports in the first half of the year, is unlikely to ship much beef now that the 50 per cent tariff is in effect. This will further exacerbate the shortage of lean beef in the US market, leading to a further rise in Australian beef export prices to the US. New pricing negotiations with Australian exporters are currently underway on the proviso that Brazilian beef will be excluded from the US market.

Additionally, with the decline in US fed cattle slaughter it is now more difficult to divert cuts into the grinding complex, further tightening supplies of domestic US lean beef. Through much of the past year, higher grinding beef prices have attracted US domestic lean cuts into the grinding mix, helping to offset lower domestic supplies because of lower US cow slaughter. 

In contrast to supplies of other local slaughter cattle, cow availability will now start to tighten into year’s end as most of the northern cow turnoff has been completed. Additionally, with rises in profitability, producers are now revaluing cows as a future valuable breeding unit which may further limit cow availability in the medium term. Southern restockers (with any sort of a spring) will become active on cows as they look to rebuild herds providing competition for cows from the processing sector.

US lean beef supplies to tighten further

Feeder prices follow slaughter cattle higher, supplies should start to increase capping gains

In the feeding sector, a shortage of suitable Angus feeder steers of weight has driven the Angus feeder steer price above $5/kg lw to around $5.20 to 5.30/kg lw. Other feeder cattle categories were slower to respond, however, the high cost of Angus cattle has forced lotfeeders to become more active on other cattle categories. This has seen European cross feeder cattle pushing to $4.30 to 4.40/kg lw and flatback feeders to $4.20 to 4.30/kg lw. Lotfeeders targeting the domestic trade, leant towards feeder heifers which narrowed the heavy discount that heifers have carried over the past 18 months. 

Contract prices across the entire feedlot complex have begun to adjust to higher cattle costs, with supermarkets lifting contract rates to closer to $9/kg cw later in the year. This and a fall of $30 to 40/tonne in grain prices are underpinning solid feeding margins and allowing high rates of capacity utilisation across the sector, which should underpin feeder prices into year’s end.

The surge in Angus premiums is partly seasonal and has been exacerbated by the mixed seasonal conditions in southern Australia. Over the next few months, there should be an increase in availability as steers sent north on agistment earlier in the year start to run in greater numbers, capping further price gains. As weather conditions begin to warm throughout Queensland there should be a general increase in feeder turnoff as northern pastures start to run out seasonally. This may reduce the rate of increases in feeder steer values and may see the Angus premiums contract.

Prices adjust higher

Restocker activity hesitant as higher prices and uncertain seasonal conditions slow appetite

The segment which has the most uncertain outlook is restocker cattle. Some restocker interest has driven prices for lighter cattle into the mid to high $5’s/kg lw, however, there has been a lack of conviction and restocker prices and activity has flattened a little in recent weeks. 

This is tied to lack of seasonal confidence and feed reserves across the south. Producers are cautious about paying inflated prices for restocker cattle and running out of feed to finish them to market weights. So, the direction of restocker cattle values will remain relatively uncertain until the southern season has shown its hand.

Restocker price direction uncertain

With the southern season still firmly in balance, the outlook for restocker cattle values remains uncertain. A good spring would provide confidence for southern producers to commence herd rebuilding.

Sources: Price data reproduced courtesy of Meat & Livestock Australia Limited.

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