Cattle prices missing the upcycle

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We had a query come in recently asking why cattle prices here are relatively weak, when there are record cattle prices in the US, and close to record beef export prices for our product. The answer is as simple as supply and demand, but we need to separate beef from cattle to see why.

US Live and Feeder cattle futures are both sitting close to record levels at the moment, as the US cattle cycle reaches a peak.  Dry conditions in the US saw the herd culled hard over the last few years, and now supply is tight, leading to higher prices.

Strong cattle prices in the US have flowed through to beef export prices for Australian product.  The US is one of our largest markets, and we send a lot of lean manufacturing beef which goes into burger patties.

The 90CL Frozen Cow indicator gives an idea of the price of this manufacturing beef. While it has come off a little in recent weeks, the 90CL is still sitting at 900¢/kg swt.  The 90CL has only been past 900¢ once, briefly back in late 2019.

In the export beef market, demand is very strong, and while our supply has lifted in 2024, prices have still gone up.  Intuitively, it makes sense that higher export beef prices lead to higher cattle prices. Figure 1 shows that despite the strong 90CL values, the Eastern Young Cattle Indicator (EYCI) and slaughter cattle indicators remain at levels much lower than 2020-2022.

A perfect market where there are no limitations on cattle being converted to beef would see much stronger cattle prices locally. Unfortunately for producers, demand at the cattle level can only be as strong as slaughter capacity allows. Figure 2 shows that while slaughter has lifted, it is still 10% short of 2019 levels.

Along with limited demand from processors, demand from restockers for replacement cattle isn’t anywhere near as strong as during the herd rebuild. As such processors have little competition for the strong supply of cows.

Figure 3 shows the Australian cattle herd is estimated by MLA at 28.5 million head.  We know from female slaughter data that the herd is yet to start shrinking in any meaningful way. The supply of cattle isn’t likely to ease in the near future.

What does it mean?

Limited cattle processing capacity is seeing Australian cattle producers miss out on very strong beef export prices. There should be incentive in terms of margins for processors to increase kills, but we know labour issues still plague the sector, not to mention rising energy costs.

Cattle prices should remain strong in the US for up to two years, so there is time for Australian producers to see some stronger values.  It will, however, likely require further increases in slaughter capacity.  

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Key Points

  • The US is experiencing very strong cattle prices and imported beef values.
  • Australia is a major supplier to the US, but stronger prices are not being seen here.
  • Slaughter capacity is limiting price rises here, as local supply remains strong.

Click on figure to expand

Click on figure to expand

Click on figure to expand

Data sources: ABS, MLA, Mecardo

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