Angus cattle

The Mad Cow (BSE) case found in Brazil has been confirmed to not be so mad after all, and Brazil continues to increase beef market access to new countries. The EYCI has stabilised, and beef continues to get more expensive in the US, while signs of increasing Asian demand provide reasons to have some confidence in export markets.

The Eastern Young Cattle Indicator (EYCI) remained stable this week at 700¢/kg cwt.

Cattle Supply backed off slightly this week, with retreating around 5K (10%) from last week’s total to 44,779 head across the east coast. Most of the change emanated from QLD, where yardings dropped 25% week on week. In contrast, supply climbed 7% in NSW. Overall, the dip in supply provided some support to the market as the EYCI stabilised and the restocker steer index gained 6¢ (2%) to reach 422¢/kg lwt. However, the processor cow, feeder, and heavy steer index all fell 1-3% during the week.  

The usual suspects of Roma, Dalby, Dubbo, and Wagga added up to 54% of the total index volume of 14,519 head, representing a 5% fall in total volume compared to last week. Keep in mind that supply at this level is still in the range of what could be considered quite high.

In Roma an increased representation of Western QLD and highlands buyers added support to steer prices. In Dalby, supply was down, but buyer attendance and interest were solid, with medium to heavy steer prices benefiting. Dubbo buyers were measured in their bidding, picking up stock on the cheaper side as a result. Wagga reported an increase in yardings, with some producers reportedly experiencing feed shortages. Competition among buyers was gauged as weaker, particularly from feedlot buyers.

US frozen cow 90CL price jumped again last week, gaining 30¢ (4%) in AUD terms to close at 796¢/kg swt. This can be attributed to a fall in the value of the Aussie dollar against the greenback by over US1¢ (~2%) and also a US5¢ (~2%) jump in the 90 CL price in US dollar terms to reach 244¢/lb.

Steiner reports that the lift in imported product prices in the US has been traced back to increased competition for meat emanating out of Asia, leading to US buyers bidding strongly to secure product.

The increased supply of Australian beef (as slaughter tracks above year-ago trends) appears to be counteracted by the strengthening of US buyer sentiment (and increased demand).

 

While boneless beef cold storage in the US remains high in a historical context, the latest January figures suggest that a drawdown is slowly taking place in response to rising US and imported product prices. Steiner makes an excellent observation that the composition of what is in storage is unknown- (It definitely isn’t all 90CL for example) therefore the potential for drawdown to help keep a lid on US beef prices relevant to Australia like 90CL may be limited.

The Brazilian Mad Cow (BSE) saga looks to be coming to a conclusion, with the Brazilian Ministry of Agriculture announcing that the World Organisation of Animal Health (WHOA) reference lab has confirmed that the isolated case found was indeed, Atypical type H. The ministry has announced that it will be meeting with the Chinese government, with the aim to lift the temporary export ban as soon as practical.

Furthermore, Brazil announced that it has finally gained market access into Mexico after more than 12 years of negotiations. Mexico is a significant importer of predominantly cheaper cuts of beef from the US, and an exporter of higher value, lean beef into the US. Brazilian imports have the potential to supply domestic Mexican consumption, leaving more headroom for increased Mexican exports, particularly into the US. Earlier this year, Brazil also achieved greater access to the Indonesian marketplace, with a further 11 processing plants gaining export accreditation.

The week ahead….

A forecast of heavy rainfall from northwest to southeast Queensland next week has the potential to cause supply to drop off as soft ground impacts logistics.

Further from home, despite the “Atypical” diagnosis of the Brazilian BSE case, the wheels of bureaucracy are still turning slowly in China, so the situation still requires monitoring.

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Data sources: MLA, Steiner, Argus, Mecardo,

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