It’s that time of year when the bold predictions for 2025 are released. You can find them for everything from Bitcoin to who wins the Brownlow. You don’t come to Mecardo for that, but we can provide some educated opinions on what the cattle market will do in 2025.
For what it’s worth I’m predicting a fairytale redemption story with
Clayton Oliver winning the Brownlow and Melbourne to win the flag. Wishful thinking maybe, and we’ll be more
circumspect on the cattle front.
The good news for cattle producers, and you’ve been hearing it all year,
is that the US herd is forecast to move into rebuild in 2025. The United States Department of Agriculture
(USDA) is forecasting a small increase in the US herd in 2025 (Figure 1), levelling
out at 75-year lows.
Beef export markets have been reaping the benefits of a weaker US herd
for much of the year, with record 90CL Frozen Cow beef prices. Figure 2 shows processors receiving a
Christmas present of prices above 1000¢/kg swt.
In the past cattle prices here, as shown by the Eastern Young Cattle
Indicator (EYCI) in Figure 2, have followed the 90CL closely. With heavy exports to the US this year, it
could be expected that cattle would be a bit closer to the 90CL.
The problem remains local cattle supply.
Figure 3 shows the cattle herd was forecast to be 30 million head, which
is expected to drive cattle slaughter back above 8 million head in 2024. Meat & Livestock Australia (MLA) are
forecasting another lift in cattle slaughter in 2025.
Slaughter capacity has grown over the last twelve months, but it is still
not enough to see a local demand-driven increase in price. Additionally, a large herd means restocker
demand isn’t as strong as it was during the boom times.
When beef export volumes and prices are strong, and cattle prices are
lagging, it suggests processors are making money. This should see slaughter
capacity increase, but this can only happen incrementally, as we’ve seen since
Covid.
What does it mean?
Slowing lifting slaughter capacity, and continued strong export demand, should see cattle prices continue to increase slowly in 2025. A jump in price like we saw in early 2020 is highly unlikely simply because supply can’t contract quickly enough to cause it.
There is some risk to the downside. With a large herd, it opens growers to seasonal risk, and a rush to destock if the season turns bad. We saw how this can happen in mid-2023, and it’s worth keeping in mind that it could easily happen again.
Key Points
- The US herd is low, and export beef prices are high, which historically means strong cattle prices.
- Growth in the local herd and strong cattle supply is keeping a lid on saleyard cattle values.
- Prices should continue to edge higher, but there is significant seasonal risk to the downside.
Click on figure to expand
Click on figure to expand
Click on figure to expand
Data sources: MLA, Steiner, ABS, USDA, Mecardo
