Amidst the big price crashes being seen across a wide range of cattle descriptions over the past two months, the incredibly robust nature of prices for EU-eligible cattle for both grain and grassfed programs is standing out like a beacon.

Grassfed EU-eligible cattle are currently worth 60-65c/kg more than their non-EU equivalents, probably an all-time record split between the two, says Teys Australia’s livestock general manager Geoff Teys.

Processor direct consignment grids for EU grassfed steers obtained by Beef Central this morning were 360-365c dressed weight ex Southeast Queensland, easing just a fraction from  recent highs of 370c/kg seen last week. EU-eligible heifers are currently 5c/kg behind that.

In contrast plenty of non-EU cattle categories that have dropped 30-40c/kg liveweight and more in the past few weeks. In comparison, non-EU equivalent grassfed heavy steers ex SEQ this week were typically worth 300-305c/kg, dead.

Quota year influence

Part of the reason for the ‘bulletproof’ pricing for grassfed EU steer and heifer in the face of big market pressure in other categories is the looming closure of the EU quota year (June 30), and the need for Australia to fill its grassfed quota of 7100-odd tonnes.

“Not filling the quota makes it harder for Australia to bargain with the EU over any potential increase in quota access,” a trade source heavily embedded in the EU market said. Additionally, individual exporters failing to fill their quota run the risk of seeing their quota allocation decline the following year.

As a result, the current big price differential for EU grassfed steer and heifer over equivalent non-EU cattle is likely to continue through April and into May. It is then likely to drop away a little, because cattle killed after May week two, will fail to arrive and clear customs in the EU by the end of the quota year on June 30. It normally takes 50-60 days for sea-freight and customs clearance from Australia to shipping ports in the EU.

Just repeating that point, for emphasis: if you have EU-eligible grassfed steer or heifer within weight and dentition specifications, for optimum return it's worth considering marketing those cattle between now and early May.  

By the end of March, Australia had shipped 5873 tonnes in the current grassfed quota year, meaning there is about 1227t remaining to be placed. April and May are typically among the biggest months for exports, for quota reasons, sources say.       

“However there won’t be quite the demand for EU cattle later in May, because that beef will not make it into the market until the new quota year, starting July 1, without the added imperative among exporters of protecting their quota share as the year draws to a close,” our trade contact said.

Parallels seen in big premiums EU feeder cattle

Just as there is a big, big premium evident in the market at present for grassfed EU Hilton quota cattle, there is a direct equivalent evident also in the pricing currently being seen for EU-eligible feeder steers being directed into the EU high quality grainfed quota.

Currently flatback milk-tooth EU-eligible feeder steers 400-500kg are making 200-205c liveweight. Contrast this with equivalent conventional (non-EU) feeders, this week making 165c, and it is evident there is a massive 40c/kg liveweight premium available. Again, that is close to an all-time record split between EU and non-EU lines, worth around $200 per head.

Prominent EU supply chain manager, James Maclean, from Allied Beef in Toowoomba, spoke about EU opportunities for both grain and grassfed cattle at last week’s Maydan feedlot field day, associated with the Primex field days Pacific Beef Carcase Competition.

He told the audience at the feedlot near Warwick that last year, Australia sold about 12,000 tonnes of beef into the EU, comprising around 7000t under the Hilton grassfed quota, and 5000t under the expanding grainfed trade, which started only two years ago.

“Market demand for EU-eligible cattle is certainly very robust at present from all the major processor-exporters, and second-tier meat trading entities servicing the EU market,” Mr Maclean said.

“The premium today for EU feeders is the biggest it’s ever been, and I think we could get 210c/kg today for steers if we tried,” he said. “That’s a massive differential over what’s available in the conventional market.”

If it was accepted that there was a 15 percent production ‘sacrifice’ in EU steers and heifers due to non-HGP use, that was worth $30 a head over 100kg gain.

“On the extreme end, the EU premium is currently worth $160 a head on feeders, and it has cost only another $30 to produce,” Mr Maclean said.

“Event at a 25c/kg premium for feeders, it is still worth $100 a head, which is way ahead of the production loss over HGP for a backgrounder.”

Mr Maclean reminded the Maydan field day audience that the EU was easily Australia’s highest-priced market, with an average boneless beef price of $10/kg, versus around $5/kg in Japan, due to the cuts involved.

He estimated that there was currently around 2000 head per week of EU-eligible cattle going onto feed, Australia-wide, for the HQ grainfed quota market. JBS alone was probably inducting 600-700/week.

That gave a total of around 100,000 grainfed cattle turned off across Australia for the EU grainfed trade annually, and growing.

“Up until two years ago, everyone was taking their EU-eligible cattle through to slaughter, because that was their only target market. But now, there is the flexibility of the EU feeder market, also.”

Even though the grainfed EU market had been in place now for two years, there was still a steady stream of producers moving out of conventional into EU-focussed production.

“It’s not in big numbers, but the people that have made the transition are stoked with the result. We sold some of the first cattle for a recently-converted EU-eligible producer on Queensland’s southern Darling Downs who got 210c/kg liveweight for feeder steers, and grassfed slaughter cattle at 370c dressed weight, while watching the conventional market collapsing around him.”