Exports not feeling pandemic pain – yet

Cattle loading on a ramp

When discussing finished cattle prices in their latest beef industry projections released last week, Meat & Livestock Australia described the situation as an “uncertain, evolving and challenging scenario”. Which doesn’t exactly fill one with confidence heading into the spring. Luckily for those already in the game, a historically high heavy steer indicator means there is still some breathing space if the price starts to head south.

The current numbers are much more positive. The national heavy steer indicator, while having dipped from its peak of 383¢/kg live weight in June, is trading at a more than 50¢/kg premium to the same time last year (currently 364.3¢/kg). This price has been supported by the lack of finished cattle available over winter – and with national cattle slaughter now forecast to be 1.4 million lower for 2020, the supply equation is likely to stay on the side of the seller. As we pointed out HERE, Victoria’s small share of the national cattle kill means their processing slowdown shouldn’t have a big impact on the market in the short term.

Demand is more complicated. Australia’s beef export volumes are yet to feel the impact of Covid-19 restrictions and global economic downturn, tracking only slightly below year-ago levels for the first seven months of 2020. And at above 642,000 tonnes shipped weight, it is the second highest volume for that period in the past five years. Dollar returns are harder to scrutinise, with only year to May data currently available, but the first quarter of 2020 reached a record high value (for the January to March period). This can be put down to another illness that has long been overshadowed – African Swine Fever. China’s decimated pig herd (pork production fell 21 per cent in 2019) means the value of Australia’s beef exports to that country rose by 27 per cent for the year to May.

However, the global economic downturn won’t go unnoticed by the Australian beef industry and its already internationally out of kilter prices, predominantly supported by a small herd and a cracking season. MLA points out that 11 out of 15 of the most valuable beef export markets are predicted to enter recession this year. If you team that with extra supply coming out of the US thanks to a Covid-19 impacted processing backlog of fed cattle, and Australia’s diminishing supply of cattle being turned off, it won’t come as any great surprise if our export beef markets start to look at lower-priced options for their protein.

What does it mean?

Domestic impacts will continue to support cattle prices in the short term, however the global Covid-19 impact will hit sooner rather than later. The cattle herd being slower to move into a strong rebuilding phase (female slaughter was still 56 per cent in May) will offer some reprieve, but with close to 70 per cent of Australia’s beef production heading offshore, the contracting economies of our key export markets will be one to watch.

Have any questions or comments?

We love to hear from you!

Key Points

  • Beef exports volumes dip only slightly for the year-to-date, and remain above the five-year average.
  • Volumes of beef sent to China this year have dropped 3 per cent, but the value of that market has risen by 27 per cent.
  • Low supply on sellers side, but export markets economies will start to slow.

Click on graph to expand

Click on graph to expand

Data sources: MLA, DAWE, Mecardo

Make decisions with confidence- ask about our board packs, bespoke forecasting and risk management services

Have any questions or comments?

We love to hear from you!
Northern bos indicus cattle in yard

Someone let the bulls out

It could’ve been a post Beef Week high, or an adjustment in demand but this week’s market exuded a higher level of confidence. Sellers were

Read More »
Angus Cattle

A good time to trade cattle?

While much of NSW and Southern Queensland has received above-average rainfall in April, some key cattle areas in Western Victoria, South Australia and WA have

Read More »

Cattle market pitches up

The cattle market gained momentum this week, as plenty of active buyers drove prices upward and allowed the market to recover some recently lost ground.

Read More »

Want market insights delivered straight to your inbox?

Sign up to the mailing list to get regular updates to new analysis and market outlooks

Independent analysis and outlook for wool, livestock and grain markets delivered to you as it’s published

Commodity conversations podcast cover image, a illustration of a sheep standing on a cow's back with grain either side
Listen to the podcast

Join the Mecardo team for the Commodity Conversations podcast, where we provide short weekly market recaps and longer conversations with guests to discuss the drivers and trends in livestock, grain and fibre markets.

Photo of a farmer surrounded by Merino sheep in dusty yards
Research: Analysis of the Australian sheep flock

In this report for LiveCorp and MLA, we analysed the historical trends in the demographics of the Australian sheep flock, examining domestic factors that influence farm-level enterprise decision making. 

Image of harvested grain pouring into a chaser bin

We don’t just bring you the most up to date market insights. Find out more about Mecardo’s services including risk management advisory, modelling, benchmarking, research & consultancy.