We’ve been waiting for the cows to come home - and stay home - for a while now. Ever since the east coast began to get some rain at the start of autumn, a significant rebuild of the Australian cattle herd has been on the cards. Breeding stock headed out the gate and to the processors at a rapid rate in 2019, with female slaughter averaging 55 per cent for the 12 months. Generally, a female slaughter make-up of 47% or less is considered to indicate the herd is rebuilding. But despite improved seasonal conditions across the east coast, that female slaughter figure has not moved much.
Producer intention to restock and rebuild the herd was expected to take a little time as they built back up from years of crippling drought. The female slaughter rate falling to 52 per cent in February (its lowest level since January 2019) was seemingly a good start. But by May it was up to 56 per cent, the highest for the year, and the 12-month-rolling-average remained stubbornly at 55%.
It would seem cash-flow was king, with high prices encouraging the continued sell off. And of course, it doesn’t rain grass, with drought-impacted paddocks taking some time to recover. Meat & Livestock Australia (in their July industry projections) point to a higher number of female cattle left in feedlots, along with less availability of male cattle, as supporting the higher cow slaughter numbers.
Rain has continued on the east coast through winter though, and the outlook points to a wetter than average spring. Team this with record-high young cattle prices, and producers might finally have enough incentive to keep the cows at home – or pay a pretty penny to get them in.
Eastern States cattle slaughter has been trending at roughly 30,000 head below the five-year average for the past couple of months as the usual lack of winter supply has been amplified by a small herd and Covid-19 pressure. Last week total slaughter was down 28% year on year, with Queensland processing 47% less females, and NSW 26% less.
What does it mean?
Restocker’s role in the cow market, both through buying competition and by restricting supply, is driving prices higher. The national medium cow indicator was at 261c/kg lwt yesterday, 53c/kg above year-ago levels. The national medium cow over the hook indicator price averaged 513.11c/kg cwt for the month of August – the highest monthly figure on record. This has closed the gap between the domestic cow price and the export value, being the US 90CL. We’ll look at the impact of that next week.
Key Points
- Cow price on the increase as supply continues to tighten.
- Delayed herd rebuild coming to fruition as we head into spring.
- High cow price and Australian dollar value tighten processing margins.
Click on graph to expand
Click on graph to expand
Data sources: MLA, Mecardo
