Cattle prices holding under attack from supply
Australian cattle prices have done well to tread water through autumn and early winter under sustained assault from high levels of supply and steady international beef prices. Overall, prices were back around 5-10c/kg lw with cows (due to large Victorian turnoff from poor pasture conditions) and Queensland bullocks (heavy northern seasonal turnoff) bearing the brunt.
These falls need to be read in context with a period of abnormally large supply. For much of this year slaughter has tracked higher, but since the start of May it has accelerated as the northern turnoff season commenced. In the past six weeks, the number of cattle slaughtered in Australia has been 17 per cent (pc) above the 5-year average. The processing sector is struggling to keep up, adding additional shifts or extending hours, but the backlog of cattle continues to grow with some processors reportedly booked up to mid-July.
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The good news is that international markets are soaking up these supplies with barely a flinch. Australian beef export levels for the 5 months to the end of May were up by nearly 30 pc with exports to the US up 80 pc and Japan up 30 pc leading the way.
For prices to improve, Australian supply needs to ease, and US beef production needs to slow. Australian cattle slaughter should soon start to flatten out seasonally as we head into July (see chart above) and provide some reprieve. In the US there are signs that production is about to ease.
US cattle on feed have slipped below year ago levels for the first time this year as US feedlotters aggressively marketed cattle this past month and didn’t fully replace them. The number of cattle available to US lot feeders will contract this year as US ranchers move to rebuild herds after years of drought.
Despite plenty of concern (cost of living, high price relative to white meat), global beef demand appears to be holding. Asian beef imports out of Australia are up 13pc for the year while prices for US domestic beef are starting to grind higher.
With signs that there may be a looming hole in US beef supply, it is no coincidence that China moved to reinstate five Australian beef processor to the approved list of abattoirs last week.
Elders market view: Local cattle prices should start to grind higher over the next quarter as local turnoff eases seasonally and US feedlot beef production backs off.
Cow prices will improve once turn off eases
A heavier than normal seasonal turnoff of females across the main eastern states dragged local cow prices lower the past month. Female turnoff should ease as Australia heads deeper into winter and this, coupled with an expected recovery in the US lean beef market, should help underpin local cow values through the next quarter.
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Over the past month US imported lean beef values have stabilised (see chart below) and should soon improve as availability of NZ beef falls off a seasonal cliff, making Australian imported lean beef the only game in town.
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Assisting the market to recover will be solid local processing margins.
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Australian cow market indicators c/kg lw
13 June | +/- week | +/- month | +/- year | |
90CL cow beef export price | 906 | n/c | n/c | + 162 |
AUST | 424 | + 10 | - 12 | + 38 |
QLD | 394 | - 4 | - 40 | + 4 |
NSW | 422 | - 16 | - 18 | + 56 |
VIC | 498 | + 24 | + 42 | + 92 |
TAS | 332 | + 30 | + 30 | - 52 |
SA | 476 | + 16 | + 30 | + 70 |
WA | 446 | + 24 | + 98 | + 6 |
The table shows the cow saleyard indicator price for each state against last week, last month and last year. Source: MLA.
Good signs for heavy export cattle
Australian heavy steer values have done well to resist pressure from a heavy turnoff of northern cattle.
Over the next quarter we should see less beef come out of US feedlots as cattle on feed numbers decline.
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This will mean less US export competition for Australian beef into north Asia and should pave the way for an improvement in local export steer prices.
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The Elders heavy steer market strength index recovered the past month, reflecting some improvement in export markets conditions. This should continue to improve as US feedlot beef supplies start to ease.
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Australian heavy steer market indicators c/kg lw
13 June | +/- week | +/- month | +/- year | |
North Asian export indicator price c/kg | 992 | - 3 | + 45 | - 27 |
AUST | 536 | - 6 | - 21 | + 51 |
QLD | 250 | - 7 | - 24 | + 2 |
NSW | 289 | - 14 | - 4 | + 13 |
VIC | 328 | + 11 | + 18 | + 35 |
TAS | 231 | - 2 | - 12 | - 36 |
SA | 315 | + 2 | + 21 | + 26 |
The table shows the heavy weight steer saleyard indicator price for each state against last week, last month and last year. Source: MLA.
Young cattle prices move above year ago levels
Prices for young domestic trade and feeder cattle are above what they were a year ago despite higher supplies. This indicates some optimism across the feed-on markets both from graziers and feedlotters. Graziers are no doubt buoyed by a more favourable seasonal outlook than last year, while feedlotters are eyeing an improvement in international beef market conditions. The latest local cattle on feed report showed record numbers of Australian cattle on feed, poised to take advantage of reduced competition from the US feedlot sector.
EYCI c/kg cw
13 June | +/- week | +/- month | +/- year | |
AUST | 595 | - 15 | - 10 | + 30 |
QLD | 590 | + 4 | - 9 | + 21 |
NSW | 608 | - 20 | - 3 | + 53 |
VIC | 560 | - 44 | + 6 | - 18 |
SA* Feeder cattle c/kg lw | 306 | - 5 | + 10 | + 14 |
WA* | 230 | - 43 | - 36 | - 97 |
The table shows the EYCI (QLD, NSW, VIC) and the feeder steer (SA&WA) saleyard indicator price for each state against last week, last month and last year. Source: MLA.
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Restocker cattle should buy support at these levels
Restocker cattle markets have been heavily supplied (see yardings below) as southern producers offload excess stock. The late and weak autumn break in many areas has prompted some producers to bite the bullet and quit stock rather than feeding them through winter.
Southern restocker cattle should start to attract northern interest at current prices as the economics of feeding them to heavier weights stack up for any producer with excess feed.
Restocker steer indicator c/kg lw
13 June | +/- week | +/- month | +/- year | |
Aust | 335 | + 7 | + 5 | + 11 |
QLD | 337 | + 7 | n/c | + 9 |
NSW | 330 | - 14 | + 8 | + 28 |
VIC | 260 | - 24 | - 18 | - 27 |
SA | 277 | + 21 | + 8 | - 2 |
TAS | 226 | + 34 | + 27 | - 70 |
WA | 276 | + 123 | + 96 | - 105 |
The table shows the restocker steer saleyard indicator price for each state against last week, last month and last year. Source: MLA.
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Sources: Price data reproduced courtesy of Meat & Livestock Australia Limited.
The information contained in this article is given for the purpose of providing general information only, and while Elders has exercised reasonable care, skill and diligence in its preparation, many factors (including environmental and seasonal) can impact its accuracy and currency. Accordingly, the information should not be relied upon under any circumstances and Elders assumes no liability for any loss consequently suffered. If you would like to speak to someone for tailored advice relating to any of the matters referred to in this article, please contact Elders.