A dry summer and failed wet season over large cattle supply areas of eastern Australia has caused ABARES to significantly revise down its prediction for average cattle prices in 2013-14.

In its most recent commodity outlook report released in early December, ABARES suggested that increased export demand would push the average saleyard price for cattle in 2013-14 to 305c/kg dressed weight, 3pc higher than 2012-13, but warned that much hinged on seasonal conditions.

Three very dry months later, it has now revised its forecast back to a price average of 290c/kg, which is 2pc lower than in 2012–13 and 18pc below the 10-year average to 2012–13, in real terms.

The downward adjustment reflects the deterioration of the season which has resulted in sharply higher numbers being offered for sale, an increased share of (lower value) cows in total sales, poorer condition of animals offered for sale and reduced demand for restocker cattle.

Looking ahead to next year, today’s ABARES Outlook forecast suggests that, provided a return to average seasonal conditions occurs in eastern Australia in 2014–15, weighted average saleyard cattle prices will rise by 12pc to
325 cents a kilogram.

A return to better seasons would result in increased restocker demand and upward pressure on the price of trade steers, while greater heifer retention would also place upward pressure on medium cows.

Strong export demand assisted by an assumed lower Australian dollar, is also expected to put upward pressure on heavy steer prices.

Cattle prices are projected to average higher in real terms to 2016–17, reflecting increased demand for younger steers for restocking, lower supplies available for slaughter and ongoing strong export demand. A return to an expansionary phase of cattle slaughter and beef production is projected in the final two years of the outlook period, placing downward pressure on prices.

Key points from today’s ABARES forecast for beef cattle include:

2013-14

• The Australian cattle herd at 30 June 2014 is forecast to be 27.4 million head, 4pc lower year on year.

• Australian cattle and calf slaughter in 2013-14 is forecast to increase by 8pc in to 9.2 million head, the highest in more than a decade.

• There has been a 15pc increase in female cattle slaughter to 4.1 million head.

• The number of cattle to be slaughtered in 2013–14 as a proportion of opening herd numbers is forecast to be 32pc, the highest since 2003–04.

• Beef and veal production in 2013–14 is forecast to increase by 5pc to a record 2.4 million tonnes, with average slaughter weights forecast to decline by 3 per cent to 259 kilograms.

• Australian beef and veal exports are forecast to increase by 10pc 2013–14 to 1.1 million tonnes (shipped weight), valued at $5.7b (up 18pc on 2012-23); maintaining Australia’s position as the world’s third largest exporter, after India and Brazil.

• Exports to the United States, Republic of Korea and China are forecast to rise, offsetting lower exports to the largest market, Japan.

2014-15

• Assuming a return to average seasonal conditions, the cattle herd is forecast to stabilise at around 27 million head by 30 June 2015.

• Cattle and calf slaughter is forecast to fall by 5 per cent to 8.7 million head.

• Reflecting the lower slaughter, beef and veal production is forecast to fall by 5 per cent in 2014–15 to 2.25 million tonnes.

• Historically high live export prices, reflecting increasing demand for feeder and slaughter weight cattle in South-East Asia, is expected to result in higher live cattle exports in the short term and fewer cattle from the northern live export region being slaughtered domestically.

• Over the medium term the Australian beef cattle herd is projected to increase slowly, to 27.7 million head by June 2019.

• Beef and veal exports are forecast to fall by 7pc to 1.04 million tonnes

• International demand for beef is expected to continue rising, resulting in a forecast 2pc rise in the average export price of beef to $5.25 a kilogram.

To read today's ABARES Outlook forecast for all commodities including beef, click here