Live Export

High northern live export prices encounter some resistance

James Nason, September 1, 2020

Does the recent slight easing in Darwin feeder steer prices represent a temporary dip in a market still heavily influenced by tight northern cattle supplies, or a sign the market has peaked and set to fall further from here?

Prices have been kept high in recent months by a combination of limited cattle availability after several years of drought-forced destocking and an unusually high degree of competition for northern cattle from southern restockers this year.

Click on to enlarge or view chart on Beef Central home page.

Feeder steers ex-Darwin have been contracted at prices around 360c/kg through late July and August, but quotes have softened slightly to 355c/kg in the past two weeks.

While supply limitations continue to maintain a strong influence over cattle pricing, the demand side of the ledger is coming under pressure from a range of factors, including the high purchase cost of Australian cattle, adverse currency movements and competition from cheaper sources of imported meat.

Amidst these collective pressures one experienced Australian export industry source said the business case for Indonesian lot feeders could only be described as “bloody awful right now”.

The price of feeder steers, already expensive for Indonesian importers to buy at 350-360c/kg, becomes even more so when converted to the Indonesian Rupiah (IDR).

The AUD-IDR cross rate is said to be as bad now for importers as it has been for many years. The IDR has weakened against the US Dollar while the AUD has strengthened against the US Dollar at the same time and appears set to continue to do so.

Competition from the lower-priced frozen Indian Buffalo Meat and Brazilian beef now available to Indonesian consumers is further squeezing margins for even the most efficient Indonesian lot feeders.

Still, there are signs of strong trade volumes to the market continuing.

Several ships are scheduled to load cattle out of northern ports in the next few weeks, including the Ocean Drover which is set to take on about 18,000 feeder cattle in Townsville, all bound for Indonesia.

Now into the second half of the dry season, there are reportedly more secondary, second-round cattle coming in, along with a higher proportion of heifers, which may have contributed to the softening of prices for feeder steers in recent weeks.

Troy Setter

Asked whether the recent dip in prices represents a minor blip or signifies that the market may have peaked, Consolidated Pastoral Company chief executive officer Troy Setter said it was impossible to tell, but noted that there has certainly been increased pushback on prices from Indonesian customers.

“Cattle going on ships were probably 360-365 a couple of weeks ago and that price was pretty easy to get, whereas today if you wanted to sell and go onto a ship you would probably get 355,” he said.

“It might just be a little bit of timing with some of the bigger ships around Townsville, but there is reasonable pushback starting to come from Indonesia due to the price of Australian cattle, the Aussie dollar, cheap Indian buffalo, and declining consumer confidence and power from Coronavirus combining to slow some sales ex feedlots in Indonesia.

“That is leading to some pushback on prices and ultimately the volume of cattle from Australia to Indonesia.”

Mr Setter said there has also been a strong demand and price increases in export cows ex-Darwin from $2.20 to $2.65.

The higher than normal cow prices were being driven by solid demand from both exporters and meat processing facilities in Broome, Bachelor and Townsville, along with strong competitor from southern restockers and processors, and constraints on northern cattle numbers through herd rebuilding.

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