IN SHARP contrast with preliminary forecasts made earlier this year, Meat & Livestock Australia now expects 2015 to set another record for national beef and veal exports.
Releasing its third quarterly update for 2015 beef industry projections this morning, MLA now anticipates total 2015 beef shipments to reach 1.32 million tonnes (shipped weight), up another 2.3pc on last year’s already record-high of 1.29MT.
Back in January (prior to the onset of further drought conditions and record high cattle prices this year), MLA’s forecast had 2015 exports at 1.05MT shipped weight, down 18.6pc on the year before.
That projection has been rapidly undermined by this year’s continued and worsening drought conditions across large parts of eastern Australia, plus “unprecedented global beef demand.”
Higher export volumes will in turn deliver reduced volumes of beef consumed in the domestic market, especially in the face of higher beef prices, MLA’s Q3 projection says. Under these circumstances, the strong cattle prices observed during the first half of the year are expected to continue.
Underpinning the adjustment in export outlook, MLA has also revised its expectations over adult cattle slaughter for 2015, suggesting it will now almost reach last year’s record turn-off. It now has total slaughter this year at 9.63 million head, down just 2.9m on last year’s record. Any slow-down is predicted to be most marked in the final quarter.
Another huge slaughter year will ultimately result in a much smaller national cattle herd over the coming years, MLA warns.
“Eastern states cattle slaughter for the first six months of 2015 has already surged to 3.8 million head, up 5pc on the same period last year, which ended with a record turn-off,” this morning’s projections says. Emphasising how high slaughter has been this year, the eastern states kill is up 20pc on the five-year average.
The flow-on effect from what will become the third consecutive year with more than nine million head exiting the system will be much tighter supplies, especially in 2017, when adult cattle slaughter is forecast to fall below seven million head for the first time since 1996.
Click the link below to view a short video of MLA economist Ben Thomas presenting the key findings from the Q3 Industry Projections
National cattle herd to decline
Considering that Australia’s combined cattle turn-off (live exports and cattle slaughter) will again exceed 36pc of the starting herd inventory in 2015 – something that had never happened before last year – and that female cattle slaughter has been higher year-on-year for 31 consecutive months, MLA says the national beef herd is expected to fall to 26.1 million head in 2016, down 11pc, or 3.2 million head, since the drought began in 2012.
“While the herd will become the lowest it has been since 1995, a slow rebuild is expected due to the producer need for cash-flow after three years of severe drought. Also, there will be strong processor and live export demand for what will be a much smaller pool of cattle, potentially enticing a greater level of turn-off than otherwise would have occurred,” MLA’s Q3 projections says.
The smaller pool of cattle will put the Australian beef industry in an interesting situation over the next five years, especially at the processing end, with only 6.9 million head of cattle expected to be slaughtered in 2017 (down 23pc from the 9 million head forecast in 2015), which will flow right through to lower volumes available for all consumers.
MLA says the strong cattle market is set to continue for the remainder of 2015 and, provided the current supply and demand situation holds true, 2016 is likely to again see a historically dear cattle market.
This is especially the case for breeding females, as the core breeding herd continues to dwindle with every week that passes by, with above average female cattle kills.
MLA manager of market information Ben Thomas said with beef exports now well on their way to exceeding last year’s record, this would make it the fourth year in a row that beef export volumes have exceeded the previous year’s totals.
“The factors contributing to this are the A$/US$ exchange rate, strong global beef prices, high Australian beef production and unrelenting demand from Australia’s traditional three top export markets,” he said.
Australia exports about three quarters of its beef to more than 100 countries around the world, but the top four destinations combined – the US, Japan, Korea, as well as the emergence of China, will make up about 80pc of Australia’s beef exports this year.
Mr Thomas said the number of cattle sold or live exported over the past two years had been so high that the national cattle herd was reducing to what is estimated to be a 20-year low, falling three million head from 2014.
“We’re going to see less cattle on the market during the next couple of years, and with female cattle slaughter going higher year-on-year for 31 consecutive months, this means the herd rebuild will be slow.
” Yet with such an intense international trading environment, the value of the cattle market is set to continue, provided the current supply and demand situation holds true,” Mr Thomas said.
Read the 2015 cattle industry projections Q3 update here.