Australian cattle market passes crossroads

For the first time in three years, Australian cattle prices are now lower than year-ago levels, and production is higher, resulting in downward pressure on the market that is expected to continue throughout 2017.
 
This is one of a number of revisions to 2017 projections included in Meat & Livestock Australia’s (MLA) cattle industry projections July update, made as a result of factors including a poor July-to-September rainfall outlook for southern Australia following the dry autumn, 20-year low female slaughter and volatile global market activity.
 
The turning point for Australian beef came in June when eastern states’ slaughter consistently tracked higher than year-ago levels for the first time since 2014, while at the same time, cattle prices dropped below year-ago levels, also for the first time in three years. These trends are likely to remain in place for the remainder of 2017 and have a significant impact on price and production expectations.

Record low female cattle slaughter as a result of the ongoing national herd re-build has impacted many parts of the industry. After the first four months of 2017, female cattle slaughter was just 973,000 head – the lowest since 1995 and representing 45% of the overall adult kill, three percentage points below the 10-year average of 48%.
 
The adult cattle kill was 13% below 2016 levels at 2.16 million head after the first four months of the year, also the lowest since 1995. However, numbers processed across the eastern states recovered in June and are anticipated to remain above year-ago levels for the rest of 2017.
 
The result is a small revision to the annual total, to be steady with 2016 at 7.25 million head, compared to April estimates of 7.1 million head. Momentum is expected to continue through to 2018, when 7.6 million head are anticipated to be processed.
 
A significant consequence of the low female cattle slaughter, combined with record high numbers of cattle on feed is that average carcase weights for the year-to-date were 296.3kg/head – a staggering 7.8kg (3%) increase on the previous record set in 2012.
 
As a result of the increase in cattle slaughter, combined with heavier carcase weights, 2017 beef and veal production is now estimated to be 2.17 million tonnes carcase weight (cwt), up 2% year-on-year.
 
Despite significant shifts in global beef markets, the forecast 2% year-on-year rise in Australian beef production for 2017 should see exports match the 1.02 million tonnes shipped weight (swt) shipped in 2016. This would result in the fifth consecutive year above one million tonnes exported.

Click here to read the July update of MLA’s 2017 Cattle Industry Projections