A 12 percent rise in the value of the A$ during October, capped by a late blitz on Friday when it jumped 3.5c overnight, has been enough for export processors to throw up the shutters and start retreating from progressively higher grid price offers evident since mid-winter.

Both JBS and Teys Australia on Friday dropped their grids for grassfed ox, ex southern Queensland, by 5c/kg, in the first sign of a fundamental correction in the market since August. The prospect was identified in Beef Central last Tuesday.

The trend is likely to gather pace in one processor’s revised grid likely to be issued later today or tomorrow. Teys Australia took the somewhat unusual step yesterday of temporarily withdrawing its SEQ grid on Friday, preferring to wait a day or two to see whether the dollar’s erratic behaviour might pass before making further cattle buy offers. A new Teys grid is likely to be circulated this afternoon.

The A$’s brief visit below parity during late September and early October is now a distant memory, with latest news on global financial market remedial action seeing it jump above US107¢ on Friday. While the lower A$ of earlier weeks was relief for Australian beef exporters, the big surge in currency value during October has taken many exporters back to a point of uncomfortable familiarity.

One exporter spoken to yesterday said on current numbers, his business was in the red on grassfed ox to the tune of 30c/kg, worth around negative $100 a head.

Unfortunately, international demand, too, will inevitably suffer from the latest currency movement. During the recent lows around US95c, several exporters reported ‘some positive difference’ to overseas buying interest as Australian product became more price-competitive. But that is now likely to again come under pressure.

It can only be hoped that the A$ rise – largely on the back of brighter news regarding Europe’s financial position – will be matched by a pick-up in global demand and consumer sentiment.

As discussed earlier on Beef Central, there is now a big spread evident in grid prices, north-to-south, as southern cattle supply gains momentum. In places the differential is 20c/kg, but one analyst said there would probably need to be a 30c gap to see any sign of shifting big numbers of cattle south to north, because of freight cost. But it would certainly see more cattle out of northern and Central NSW being shipped north to Dinmore, Beenleigh and Oakey.

Biggest kill since May

As the grid price tide on heavy cattle showed signs of turning under the weight of the A$, Eastern States slaughter numbers hit a five-month high last week, reaching 142,639 head for the seven days ended Friday. That’s the biggest weekly kill seen since May 20, and the seventh largest for the calendar year.

There is probably an accumulation of reasons for the lift in processing activity on the previous week.

From the supply side, one is producers sensing a nearing of the top of the market. Another is buying some ‘insurance’, conscious of not being caught with finished cattle which might not be able to find a home later due to wet weather processing disruptions, like those experienced early this year. The strong outlook for another wet summer may be fuelling this.

MLA chief analyst Tim McRae points out, also, that October/November are traditionally heavy production months, and the big beef export months as well.

“But whether this level of kill is sustainable, given the global demand outlook and currency is yet to be seen. Weather may also play a part,” Mr McRae said.

“Southern states have yet to see a real start to summer, and the combination of good prices and cattle in good nick means many producers may be keen to market some stock in coming weeks.”

One processor contact said the last of this year’s Channel Country grassfed ox were now moving, cattle were flowing more freely in the south with warmer weather, and there was now only another five or six weeks of the processing year left before Christmas shut-downs started to appear.

Kill numbers up everywhere

All east coast states displayed solid rises in last week’s NLRS slaughter report.

Queensland’s kill last week reached 75,051 head, up a solid 5pc on a week earlier, and 3pc up on this week last year – one of the rare recent occasions when killing rates this year have been higher than the same period in 2010. The female component at 20,611 continues to be low, representing just 27.5pc of the total adult state kill (Beef Central would like to correct last week’s references to female kill, which were miscalculated, incorrectly based on females as a percentage of male kill, not of overall kill).

This current week’s Queensland kill is likely to retract a little on last week, however, because of a Butcher’s Picnic holiday yesterday at several big processing sites like Dinmore, Beenleigh and Beef City. Anticipation of that closure may have partly contributed to the large Queensland kill seen last week.  

Last week’s tally in NSW reached 35,215 head, up 2pc on the week previous, while Victoria jumped 3pc to 19,881 head. South Australia was the big improver, leaping 9pc to 8398 head, while Tasmania was also up 3pc to 4094 adult cattle.

While offerings of Australian beef in the US were higher last week, the sharp appreciation of the A$ also served to dampen buyer sentiment. Imported Australian 90CL cow meat traded at US189.5¢/lb last week, up 2¢ on a week earlier but still 18pc above the same period last year.

As can be seen on Beef Central’s home-page graphs, in A$ terms, 90CL cow meat traded at 371.5¢/kg last week.

The combination of the high A$ and strong competition from other markets is constraining Australian beef exports to the US. With a week’s data still to be reported, shipments for October were still below 10,000t, compared to the five-year October average of 20,000t.

Excess weight cops big penalties

In other market observations, both processors and the trade are talking again this week about evidence of excess weight in cattle suitable for the heavy domestic trade, both MSA and non-MSA.

“It is a factor in supermarket-type cattle at present. Producers paid so much money for weaners earlier that they are motivated to get as much weight into them as they can before turnoff, to get out of jail financially,” one processor said.

But as a result of that trend there are some enormous discounts on carcase weight evident in southern Australia at present, in places up to 40c/kg, for 0-2 tooth cattle 320kg-plus carcase weight – weights which are coming forward in surprising numbers.

“Those great big cube rolls are just about impossible to place on the domestic market, at a realistic price,” one southern MSA processor said.      

While the grid weight discounts are not as severe yet in the north, the weight issue is occurring there as well.

It was clearly apparent in Queensland kill stats presented at an AgForce Cattle board meeting last Thursday. While there were 18,000 less cattle killed in Queensland this year-to date, there has in fact been 19,000 tonnes more beef produced. The August Queensland kill weights (the most recent official figures released) were at all-time record highs, for any month, hitting about 305kg.

• The NLRS Eastern States Young Cattle Indicator closed yesterday at 401.75c/kg, up 5.25c from a week earlier. The heavy steer indicator (192.7c) was down 2c, and medium cows (148.7c) down 3c on a week ago.