Cattle update - September 2024

Cattle prices continued to firm in the past month, led by slaughter ready heavy steers and processing cows, and supported by the last round of buying for the United States Labor Day holiday – the last major demand event of the US summer. US beef demand has supported the entire global beef complex through 2024 and is the key reason for higher Australian cattle values. In the past few months, the US market took around one third of our beef exports compared to around one quarter this time last year.

Feeder and domestic trade cattle values gained momentum as the month wore on as grain prices fell and cattle feeding margins improved. Restocker cattle values continue to be the laggard with spring seasonal conditions yet to show their hand.

Over the next few months, we transition to a period of seasonally weaker beef demand in the nth hemisphere winter. At the same time, US feedlots are front loaded with cattle (numbers of cattle on feed >120 days are +11 per cent on last year). US processors have been unable to pass on higher cattle and beef prices to consumers and are losing money. With a period of higher supply and lower demand on the horizon there appears to be only one way for the international beef and cattle complex to go the next few months.

While this would normally signal lower prices for Australia, our processing margins are strong (owing to our cattle prices being much lower than US cattle). The key for Australian values in the next few months lies with supply. If weekly cattle slaughter continues to remain above 140,000 head per week our values may struggle to push higher. However, any dip in cattle supply will see increased processor competition to maintain throughout which will aid cattle prices in pushing higher. 

Are heavy steer prices running out of steam?

International fed beef prices have plateaued the last few months while local heavy steer prices have risen, tightening processing margins. In the next few months, global beef demand will weaken seasonally, and US fed cattle supply will increase and place some pressure on fed beef prices. However, we should get a reprieve from heavy slaughter as Queensland turnoff eases which will assist prices in grinding higher as we head deeper into spring.

Australian heavy steer market indicators c/kg lw

This table shows market indicators for Australian heavy steers. Source: MLA.

Local supply to dictate extent of cow price rise through spring

As the charts below show, international manufacturing beef price rises have not kept pace with local cow price gains and as a result processing margins on manufacturing beef have tightened. Seasonally US manufacturing beef prices tend to fall during the northern hemisphere autumn due to a pullback in demand and an increase in US cow slaughter. Additionally, the US market is having to absorb increased shipments from South America as product is diverted away from the sluggish Chinese market. Already the market for fatty trimmings is showing signs of fatigue falling 30 per cent in the past fortnight. We are yet to see the same weakness in lean beef trim owing to lower US domestic supplies, but this could change as US cow slaughter increases seasonally into the nth hemisphere winter. 

Australian cow market indicators c/kg lw

This table shows market indicators for Australian cows. Source: MLA.

Feeder and trade cattle start to gain momentum

Although feeder cattle have given up some price gains this week, they have been gaining momentum fuelled by lower grain prices and improving feeding margins. In the past week, grain prices have made season lows with wheat falling to around $300/t in the north and barley at a $20/t discount on news that the Chinese Government ‘unofficially’ told importers to slow down purchases. 

In contrast to last spring, we should see feeder cattle prices move higher towards the 5 year average through the next quarter.

EYCI c/kg cw

This table shows the Eastern Young Cattle Indicator. Source: MLA

Opportunity for restocker/light cattle

Restocker and light cattle remain the best buying across the cattle complex as price gains for these categories lag behind market ready cattle values. As spring conditions show their hand and confidence in the season improves, we expect these cattle to find some buying support.

Restocker steer indicator c/kg lw

This table shows pricing indicators for restocker steers. Source: MLA

Paul McCormick Northern Livestock Manager for the Customer Solutions Team, reported from Townsville that “prices for market ready cattle and cattle to go into the feedlot remain fully firm, and restocker steers are starting to find support. But light heifers with more than 50 per cent Bos Indicus in the 200 to 250kg liveweight range are hard to place. You can buy as many of these as you want to around $2 per kg liveweight”.

As the chart above explains, heifers are trading at up to three times the historic discount to steers and represent an excellent buying opportunity.