The past two years followed the usual slaughter and price trends in Australia’s cattle market, but this year the picture has been different. Slaughter rates have tracked above average and prices have tracked below.
Cattle slaughter patterns vary considerably in the eastern states. Queensland is typically more consistent, regardless of the season, due to a steady supply from feedlots, while NSW, Victoria, SA and WA have more pronounced peaks and troughs, reflecting spring calving and autumn weaning. Queensland has spring and autumn supply flushes, but the trend remains much smoother.
Cattle slaughter across the eastern states this autumn has trended generally higher than the 10-year average, underpinned by the prolonged, widespread dry spell and exacerbated by a large national herd.
The previous two wet seasons in the north brought plentiful rain, and allowed for significant herd growth. However, the past year has been the exact opposite and slaughter rates have reflected the conditions.
Similarly, in the southern states, and in particular western Victoria, where it has been dry for more than 12 months, the prolonged dry spell has been reflected in cattle supply and prices.
In Queensland, since September 2012, when the first fears of a drier-than- normal wet season in the north emerged, cattle slaughter rose above the 10-year average (Figure 1). As the fears were realised, slaughter numbers remained above average through summer and autumn.
While male cattle slaughter was high, driving the increase was a significant rise in female cattle slaughter, with consistent weekly averages exceeding 34,000 head – and hitting the highest weekly female kills since May 1998 (MLA’s NLRS weekly slaughter collection).
A large proportion of the cattle produced in northern NSW are most likely slaughtered in Queensland, however NSW has also recorded slaughter increases (Figure 2) for the year-to-date. The usual autumn increase started one month earlier than usual. In Victoria and SA, while cattle slaughter for most of 2012 was significantly lower than the 10-year average (with the same peaks and troughs as NSW), from March onwards, numbers began to creep above the long-term trend.
Slaughter in the west, tracked well below the 10-year average during 2012, which is more the result of fewer cattle in the region, particularly in the south, than improved seasonal conditions (Figure 3). Slaughter so far in 2013 has been above that of 2012, partly due to the restrictions on live cattle exports in the north, causing more cattle destined for slaughter, as well as the continued run of dry weather.
Seasonally, slaughter tends to decline over the winter months, although the rate at which it declines this year will largely be influenced by the effectiveness of any winter rain in the north, and the extent of a break in the south. If dry conditions persist in the north and producers cull numbers, the higher throughputs are expected to be sustained.
A good indication of the capacity for future herd rebuilding, or liquidation, will be female slaughter through winter, when female throughput traditionally declines.
The Eastern Young Cattle Indicator (EYCI) generally tracks the inverse of slaughter, declining with the autumn and spring cattle flush, and then improving as supply shortens over the winter months.
Prices are also affected by rainfall and feed conditions, sheep and grain prices and other external variables. Despite these factors, seasonal calving and weaning, and slaughter, clearly have a heavy influence on prices.
For the past two years, cattle prices have sat above the long-term trend, however, this year prices over the summer and autumn slowly drifted south, as northern conditions deteriorated, and feedlots and processors became fully booked – up to six weeks in advance in some cases (Figure 4).
Cattle prices have felt the pressure of increased numbers and reduced demand, with the EYCI falling to the lowest levels for a number of years. Prices in WA have also felt the pinch and are considerably lower than the strong prices received in mid 2012.
The bright side
While slaughter has been surging, encouragingly exports have been tracking at a record pace for the year, with preliminary forecasts for the 2013 volumes to exceed the 963,000 tonnes swt record set in 2012.
Continued strong demand in China, the Middle East and other developing markets has offset subdued demand from Korea and Japan, although these markets are still large outlets for Australian beef.
All the talk is about kill figures and tonnage records exported(mainly to China). How about somebody find out what the companies are landing meat to China for and we know that most of the meat from the north came onto feed for barely $1 per kg DELIVERED! All of us with more tradional higher speced beef are held out of the Full feedlots and after several months waiting -are booking space ahead – and not getting a price commitment.This is an absurd way that we must do business and totally anti competitive.We must get an act of parliament for a bill similar to the" Packers and Stockyard Act "that rules in America.Transparent pricing will be a first step to open competition.
– Rob Moore
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