The price direction of Australia’s cattle market and national herd rebuild now hinges on a solid seasonal break, following a dry finish to winter and hot September 2017 across much of Australia.
Meat & Livestock Australia’s (MLA) October cattle industry update maintains July 2017 slaughter forecasts, with some upward revisions to projected beef production and export volumes as a result of higher carcase weights.
MLA’s Market Intelligence Manager Scott Tolmie said the main impact of the poor season has been the downward trajectory of Australian cattle prices, largely caused by reduced restocker demand.
“However, rain across southern Queensland and northern New South Wales in early October 2017 has revived the market, with reduced yardings and stronger restocker buyer activity lifting prices,” Mr Tolmie said.
“If the positive rainfall outlook for eastern Australia in October 2017 comes to fruition, it will go a long way to supporting young cattle prices.
“Indeed, the recent rain across key cattle producing areas saw the Eastern Young Cattle Indicator (EYCI) kick, regaining 25c/kg carcase weight (cwt) or 5% over the first week of October 2017 — a clear indication of the likely larger response if a more complete seasonal break arrives.
“Feedlot demand has also supported the EYCI, driven in part by robust export demand for high quality grainfed product in Japan and Korea, especially over the past few months.
“With the herd rebuilding cycle still underway, the availability of lightweight stock through markets remains limited, which should see prices continue to track above the five-year average for the remainder of 2017.”
Mr Tolmie said the dry is yet to jeopardise the national herd rebuilding, with adult cattle slaughter remaining on track with the July 2017 update forecast of 7.25 million head.
“Based on the more positive rainfall outlook for the rest of 2017, producers are not expected to further accelerate their current turn off at this stage. However, further dry weather could derail the broad industry rebuild that is underway and challenge many producers with some tough decisions,” Mr Tolmie said
Record numbers of cattle on feed and a relatively low proportion of females making up cattle slaughter has resulted in an upwards revision to average carcase weights.
“Australian adult cattle carcase weights have held up well in 2017 - the national average hit a record monthly high in April 2017 of 299.2kg, and has averaged a record 296.5kg for the year to August 2017 – 10kg or 4% higher than the corresponding period in 2016,” Mr Tolmie said.
“As a result, the 2017 forecast for the national average adult cattle carcase weight has been revised higher than what was projected in the July 2017 update, to a record 297.4kg. This represents a 3%, or 9.2kg, increase from the record reached in 2016.
“Higher average carcase weights have prompted a slight increase in projected beef and veal production, from an estimated 2.17 million tonnes cwt in the July 2017 update, to 2.18 million tonnes cwt – a 3% year-on-year increase.”
The rise in Australian beef production has seen exports also revised slightly up from 1.02 million tonnes shipped weight (swt) to 1.03 million tonnes swt for 2017.