Live Export

Indonesian steer price climbs to $2/kg on supply concerns

James Nason, 25/07/2012

Prices for northern export cattle to Indonesia have jumped from $1.75/kg to $2/kg in recent weeks, as exporters scratch to find adequate numbers to fill the remaining 98,000 head quota.

That there could be talk of a shortage of suitable cattle for Indonesia in a year which has seen the country cut its annual import quotas almost by half may seem unlikely.

However northern producers, agents and exporters have told Beef Central this week that a combination of factors has conspired to place serious constraints on northern supply, which include:

  • The number of cattle that are going over the 350kg weight limit due to the good season across the north;
  • The high number of northern prodcuers believed to have taken the opportunity to sell younger cattle to grassed-up restockers and to feedlot buyers following continued negative demand signals from Indonesia; 

  • The recent kick in Middle Eastern demand, which has seen 35,000 cattle shipped to the market in recent weeks, with new orders for the region currently being filled;
  • The overall rundown that has occurred in northern cattle numbers as a result of long-running drought in the 2000s and the accelerated turnoff of older cows that followed Indonesia's enforcement of 350kg weight limits in 2010, which in turn has affected young cattle availability now. “You’ve only got to drive around to see how low numbers are,” one NT rural property observed recently.

A northern buyer told Beef Central that northern graziers had been unable to plan ahead because of the uncertainty created by the Indonesian permit situation, and many had taken the chance to sell younger cattle to restockers carrying good levels of grass, such as those in central and western Queensland, while the opportunity existed. 

As a result, he said, the usual northern cattle numbers “just aren't there this year”.

“They have had such booming seasons inside, and with bullocks getting around $1200, restockers have been able to buy two (feeder steers) for one,” he said.

“They are taking up a lot of the slack.”

NTCA president David Warriner told Beef Central recently that he believed exporters would find it difficult to fill second half quotas due to the number of cattle that will exceed the 350kg weight limit and also because of the number of breeding cattle sold out of the north in recent years.

He said producers had little option in the face of negative demand signals from Indonesia but to seek alternative markets for less money.

“Just because the cattle have gone doesn’t mean anyone is happy about it,” he said. “They have been unloading at a loss.”

The shortage of available cattle has had an affect on prices, with boat orders currently out for early- and mid-September delivery at $2/kg, according to Bernie Brosnan from Ray White Rural in Katherine.

“That is it is going to make it very difficult for anyone else to buy something under that mark, knowing that those boats are coming up,” Mr Brosnan said.

“I don’t know if it will go much further at the moment, because at that price a couple of boats are likely to have a strong look at Townsville and load out of there.”

Some cattle over the 350kg range had been going to Middle Eastern orders and a handful of smaller boat orders to markets such as the Philippines, at rates of around $1.30-$1.40/kg, while others had been moving south to domestic processors.

It is understood that larger producers with the capacity to put together big lines of shipper cattle have been holding out for $2/kg as a minimum price, which in the current constrained supply environment has increased the pressure on exporters to meet that price point.

While some in the northern trade have expressed hope that Indonesia may issue additional quota by September to relieve reported meat shortages in the country, serious questions are emerging about the capacity that exists to meet additional orders for cattle under the 350kg limit.

Sources said another factor that was likely to exacerbate the supply issue later in the year was the fact that exporters were understandably not committing to ships to Indonesia due to the lack of certainty surrounding ongoing quota arrangements.

Not all agree on the extent of the supply shortage, with some trade sources telling Beef Central yesterday that while numbers were indeed tight, they believed it was unlikely that the 98,000 head second-half quota would not be filled.
 

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