It is in July when cattle slaughter historically starts to trend lower. With cattle being hard to finish on grass in the winter in the south, we usually see fewer cattle coming through the system. With cattle slaughter currently remaining very strong, prices aren’t going through their normal winter rally.
Figure 1
shows East Coast cattle slaughter actually peaked at the end of June. The five-year average shows that it’s
actually not unusual to see strong cattle slaughter at this time of year, as
supply trends have shifted over the years.
The five-year
average also shows that cattle slaughter generally trends down from July
through to October. In 2023 we obviously
saw the opposite trend as cheaper cattle encouraged processors to increase
capacity.
All eastern
states are seeing stronger slaughter rates at the moment. Queensland is by far the largest slaughter
state, and they have averaged 15% stronger processing rates than last year over
the past 8 weeks.
NSW has had
a more benign increase, averaging 8% higher than last year, while Victoria has
had a very large increase, up 48%. To
put that in perspective, however, the total number of year-on-year increases in
Victoria in the week ending the 5th of July was 6500 head. In
Queensland, they slaughtered 11,490 head more than the same week last year.
Part of the
reason for the strong winter cattle slaughter is the record numbers of cattle
on feed. Figure 2 shows that in March Australia
had 1.35 million head of cattle on feed.
This was 17% higher than the same quarter in 2023. The June cattle on feed numbers are not out
yet, but they are likely to remain strong.
The rise in
lotfeeding saw the turnoff of grainfed cattle increase 15% in the March quarter,
which is no doubt helping fill the period when grassfed cattle have
historically been in tighter supply.
The Eastern
Young Cattle Indicator (EYCI) has moved a little higher, but it is cows that
have had a stronger rally (figure 3). We
can also see in Figure 3 that the 90CL Frozen Cow export prices remain very
strong, and cow supplies do weaken as we approach spring.
What does it mean?
Increasing numbers of cattle on feed appear to be boosting finished cattle supplies, and dampening prices at a time of year when we historically see some premiums. We have been seeing processing capacity constraints keeping a lid on price rises for much of the year. We probably need to see a tightening of supply before we get any winter price premiums.
Key Points
- Cattle slaughter remains very strong as we move through winter.
- Increases in the supply of grainfed cattle may be keeping a lid on winter price premiums.
- Cow prices are rallying, as supply of those still gets tighter approaching spring.
Click on figure to expand
Click on figure to expand
Click on figure to expand
Data sources: USDA, Nutrien, ALFA, MLA, Steiner group, Mecardo
