Slaughter cattle flow starts to build

Jon Condon, 21/02/2012


With the flow of slaughter cattle likely to increase further in coming weeks, attention remains focussed firmly on the A$ currency value and export customer demand.

Larger multi-site processors contacted by Beef Central yesterday all said cattle in larger northern production areas were now ‘on the move’ and the current week’s kill can be expected to show a further jump in numbers.

A milestone worth noting this week was a new record high imported 90CL beef price to the US, hitting 208US¢/lb – highlighting the sustained strong US and global demand for lower-priced manufacturing beef.

A number of processors and wholesalers this week reported that there is an unusually large volume of cuts that would normally be sold as whole primal muscle meat (typically knuckles, topsides, silversides) heading for the grinder.

Concerns continue to mount that as weekly kills rise, the lack of strength in export demand (with the exception of grinding beef exports into the US, which looks set to reach close to 17,000 tonnes in February, at good prices), will see diversion start to occur onto the domestic market.

That, in turn, will put greater pressure on domestic wholesale beef prices, however current strong turnover among the two major retailers due to price wars and special offers could help moderate that effect, one large processor said.

Recent feedback suggests both Coles and Woolworths may currently be recording ‘high single digit’ or even ‘double digit’ growth in sales over the meat counter.     

Demonstrating the impact that currency has on export outcomes, however, was that fact that last week’s record US imported grinding meat price (US208c/lb) was worth 402.4c/kg when converted into Aussie dollars, at the prevailing exchange rate of US107.32c.

Compare that with numbers from November 24 last year, when the same product was paying Australian exporters 425c/kg, due to a much kinder currency value of US96.87c (see graph). So record prices in an importing country do not necessarily translate into records in the country of export.

Based on current market influences and likely cattle flow patterns, Beef Central expects to see further declines in meatworks grid prices in coming weeks as kills climb – unless there is some dramatic turnaround in North Asian demand, a substantial correction in currency value, or both.

Based on current export meatworks profitability on grass and grainfed export cattle, there could easily be another 20c/kg downside on cattle prices in the current cycle.

As large areas of Queensland and NSW continue to dry out after earlier rain disruptions, access to cattle is starting to free-up. Queensland’s major Roma selling centre re-opened for business on Thursday, after a three-week rain-induced layoff. The key road access to the west via the Mitchell bridge also re-opened to heavy traffic, further expanding supply.

Good numbers of prime cattle came forward at Roma’s first prime sale after re-opening on Thursday, with an expanded gallery of meatworks buyers beyond the familiar faces. The yarding contained a large number of heavy cows, while more grown heifers were penned than normal. Bullocks mostly held firm in price and bulls attracted more processor buyer competition.


Grid prices steady

Southern Queensland’s major processor grinds have changed little over the last seven days, due to the modest recent increases in rates of kill.

Typical grid prices quoted yesterday were 335c/kg for four-tooth grassfed export steer, 340c for 0-2 teeth and 320c best cow money, MSA steer 350c/kg. As highlighted last week, that narrow 20c/kg split between cow and milk-tooth steer graphically reflects the relatively stronger demand for manufacturing type meat over table cuts at present. More on this topic later in the week.

The Eastern States weekly kill tally recorded by NLRS for the seven days ended Friday, showed a total throughput of 129,629 head, a 2.2 percent rise on the previous week, but still some distance from ‘healthy’ kills of closer to 150,000 head.    

State-by-state, there were rises evident almost across the board.

Queensland's kill tally last week showed a further 2pc improvement, lifting to 64,734 head. This was still 19pc below the corresponding week last year, though.

NSW kills lifted 9pc to 31,840 head, after a 5pc rain-induced slow-down the week before, but was still back 15pc on this time last year.

Victoria’s kill at 20,795 also lifted 2pc on a week earlier; South Australia (8100 head) was also up 2pc; while Tasmania recorded the only decline, being -3pc at 4160 head.

Some southern processors reported cattle starting to pull-up, quality wise, with the season the way it is going. 

In export market news, US imported beef prices advanced higher last week on moderate volume and higher asking prices from overseas suppliers.

Trading was more active on the lean side of the complex, with market participants indicating the 90CL trade CIF out of NZ at around US2.06-2.07/lb and Australia asking about 2.10c, but with some business done about 2c below that.

The market for CIF 85CL remains very limited as other competing importing markets continue to pay as much as 5c/lb over US CIF values. Fat trim prices remain unsteady as US offers are well below CIF asking prices in Australia and NZ, where supplies are limited.

Even as volume offers from NZ and Australia have improved compared both to the beginning of the year and year ago levels, prices continue to climb, in US$ terms. In part this is driven by very tight US domestic cow meat supplies and extremely high US cow meat prices.

Beef prices in the US have skyrocketed overall as evidenced by record high cattle prices. The US Cattle futures market is currently pricing US cattle at $130/cwt, which would represent an all-time record high if achieved, and even higher prices for the second half of the year.

Using a five-year average ratio of 90CL beef trim to cattle, current futures are pricing 90CL domestic fresh grinding beef as high as 2.18/lb in the northern hemisphere summer, analysts say. End users, however, remain nervous.

  • The NLRS Eastern States Young Cattle Indicator closed yesterday at 390c/kg, up 0.75c on Friday, but down 0.5c on a week earlier. The heavy steer indicator (181.7c) was -1c on last week, while medium cows (142c) were -1c.  


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