Cattle herd drover

The recent slump in prices and increased availability of cattle as mustering activity in QLD intensifies have encouraged another increase in supply to the yards this week. However, demand seems to be waning, as feedlots work through recent purchases, and slaughter volumes show signs of stalling.

The Eastern Young Cattle Indicator (EYCI) saw another significant fall this week, of 27¢ (5%) this week closing at 587¢/kg cwt. In QLD, increased supply pressure and more selective buyers took a profound toll on prices, with Roma steer prices dropping 66¢ (9%) to settle at 681¢/kg cwt.  Dubbo prices shed 52¢ (8%) to finish at 627¢/kg cwt, in contrast, Dalby steer prices recovered 11¢ (2%) to reach 650¢/kg cwt, and Wagga prices jumped 38¢ (6%) to trade at 682¢/kg cwt.

The increase in supply solely emanated from QLD, which clocked in a 61% week-on-week jump in supply to the yards. While total east coast yardings currently sit almost exactly on par with the five-year average, QLD yardings of close to 20K head this week were 9% above their state’s five-year average. To put current QLD volumes into perspective though, 20K per week in late May is comparable to any prior year between 2018 and 2021. In comparison, marketing activity in Victoria, at 5.6K head this week is 38% below the 5-year average. As such, it can be said that most of the selling pressure is coming from QLD and NSW.

Processor throughput last week was stable, at 116K head. NSW appears to be running at a strong level of 31K head, which is within 17% of the May 2019 levels. QLD slaughter of 62K is 21% off its May 2019 level of 79K head/week. In contrast, the Victorian slaughter of 14K is 47% below 2019 levels, and SA at 3K, is also dragging behind by 37% from its May 2019 equivalent. As such, we can deduce that there is probably plenty of technical headroom to increase throughput from current levels in our beef processing fleet, at least on the capital side anyway.

Labour issues may have diminished somewhat from the critical issues seen in the last couple of years on a national scale, but it’s obvious that Victoria and SA are probably still suffering shortages. Given how pricing has already collapsed for finished cattle, it’s also possible there just isn’t sufficient demand at high price points for Aussie beef in the international markets to support higher levels of exports and slaughter.

Similar to the EYCI, the national indicators also mostly fared poorly this week, with the wooden spoon going to restocker steers, which shed 16¢ (4%) this week to close at 347¢/kg lwt. It appears that the market gauged that the 20% decline that cow prices had sustained over the last month was sufficient, with cows closing the week stable at 209¢/kg lwt.

The US imported 90CL frozen cow price suffered another slide in price, declining by 7¢ (<-1%)  over the week, to close at 813¢/kg cwt. Steiner points out that in the US marketplace, foreign 90CL boneless products are now being offered at a steep discount to domestic US product.  This is only an issue in the short-term spot market, as forward markets are showing that prices for imported beef in the US improve in Q3 & Q4 this year. The US had a mad cow scare of its own last week, with a 5-year-old cow testing positive for BSE of the atypical type, which is considered benign. Given that the meat from the impacted animal did not enter packaged US beef supply chains, there has been no reaction on the trade front with any import bans being imposed on US beef.  In contrast, a similar scare this February in Brazil, which is considered to have less stringent standards and processes than the US resulted in a month-long suspension of trade with China. This highlights the importance of trading partners’ confidence in exporters’ food safety and traceability systems.

The week ahead….

The outlook for cattle supply is one of increasing volumes for the next few weeks on the back of low prices, mustering activity, and expectations of deteriorating pastoral conditions. In tandem, we have signs of weakening international markets for Aussie beef and an uncertain global economic outlook weighing on demand.

Locally, it appears that processor throughput is potentially stalling, providing little hope that increased purchasing demand will come through.  Reports that feedlots demand is waning, with buyers being extremely selective on the specification that they are willing to procure is adding to the uncertainty.  All this adds up to a bearish outlook on price and a soft week ahead in cattle markets.  

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Data sources: MLA,  Steiner, Argus, BOM. JS Ferrero, Mecardo

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