This year’s delicate balance between supply and demand in the Australian export beef supply networks is in evidence this week, where recent higher kills have already started to exert pressure on price in key markets like the US and Japan.

Exporters this week were apportioning part of the blame for the recent 6pc decline in 90CL grinding beef prices into the US to the added beef volumes now coming out of Australia.

While there are other factors at play, including a rebuilding of supply momentum out of NZ following the winter lull, and a general seasonal decline in demand for manufacturing beef in the US, exporters spoken to yesterday said higher local production momentum was definitely a factor.

While there has been some recent encouraging trade signs out of Korea and to a lesser extent China, trade sources in Japan this week reported seeing increased Australian grassfed offerings in the market. More volume normally translates into downwards pressure on price, especially while demand in Japan remains subdued.

The current uncertainty over the looming introduction of the shift in age limit on US imported beef from 20 to 30 months in Japan is also starting to exert some influence on the trade in imported beef.

“It’s making traders nervous, because they know that if the Japanese market does suddenly open up, there is going to be more US product available, and potentially at lower prices. Nobody wants to get caught with too much imported product in stock – either Australian or US in origin – when volume and prices could suddenly change,” one trade source said.

While most stakeholders still see any change in the US 20-month rule as being months away, at earliest, Japanese meat traders and importers are adopting a very cautious approach to purchasing.

The signals they are sending also have a bearing on volumes of Australian cattle entering grainfeeding programs now, for turnoff early next year.

While the popular view is often that grainfed and grassfed prices are largely unrelated, others argue that there a relationship does exist – particularly on the commodity-type cuts like rounds and forequarter meats. That may apply all the more in a year like this, when the general standard of grassfed meat is a little closer to grainfed, due to the season.      

The past fortnight has seen a marked jump in beef processing throughput across Eastern Australia, driven mostly by the dry finish to winter and into spring across large areas of southern Queensland and southern and northern NSW. This has encouraged producers to lighten-off numbers in case the dry conditions continue, particularly as many are carrying larger stock inventories than they were a year or two earlier.

Also underpinning the higher recent rates of kill has been substantial flows of cattle out of central and western regions of Queensland –  accentuated by lower turnoff in the past two years as producers retained cattle in the wake of the past two big wet seasons. Reflecting the flush seasons of the recent past, reports indicate that many of the western lines of cattle have been well above previous season’s weights.

Unless there is a sudden turnaround in seasonal fortunes across a large area, processing throughput levels into October and November are likely to be well above the same period last year, MLA said in commentary on Friday.

“Historically, October and November is when Queensland throughput levels peak, assisted by the desire for producers to market cattle before the start of the wet season, when logistical issues can prevent sales,” MLA said.

Last week’s Eastern States kill reported by NLRS went close to maintaining the high level set a week earlier, which was the fourth biggest weekly kill recorded this year.

Last week’s tally of 137,284 represented a 500 head or 0.3pc decline on the week previous, but still represents the fifth largest weekly tally for 2012, and the second highest since the end of May.

Queensland fell just short of its ‘benchmark’ 75,000 head number, considered to be an indicator of something close to a comfortable capacity kill, reaching 74,457 head, down 1pc on the week previous.

While there were some encouraging localised falls of up to 25mm in parts of Central Queensland and along the southern Queensland coast late last week from the large weather system directing offshore winds onto the coast, these weren’t enough to make any significant impact on current pasture conditions in Queensland.

Last week’s Queensland result maintained the recent sequence of low female kills, with cows and heifers again contributing less than 29pc to the weekly tally, as herd rebuilding continues.

NSW also showed a softening trend in rates of kill, down 2pc last week to 32,203 head.

Expect to see a big slump in kills in the two largest processing states for the current week when figures are calculated, due to last Monday’s Queen’s Jubilee holiday.

In southern states, Victoria last week reported a solid 3pc rise in kills to 18,979 head, as more new-season finished cattle start to emerge. South Australia was also +7pc to 8431 head, for similar reasons, while Tasmania was -12pc at 3214 head, due to a plant closure.

In Queensland, processors again appear to be heavily booked for the early stages of October, with one major player still showing signs of being under supply pressure, withdrawing from offering quotes.

That’s a sure sign that its kills are still well-subscribed. Most Queensland processors are reluctant to book spot cattle out more than two or three weeks, due to the vagaries of the market, currency, and other factors.

Most SEQ processors this week left their grids basically unchanged for a second week, offering public grid prices around 330-335c/kg on milk and two-tooth grassfed ox, 325-330c/kg on four-tooth ox, and 295-305c/kg for best cow. That follows the general physical market trend, where prices and cattle volumes last week were fairly steady at most selling centres. Queensland saleyard numbers were up 6pc last week, while NSW was down 10pc, and Victoria, basically unchanged.

Almost regardless of international and domestic beef demand and currency pressures, weather will play a big part in East Coast processing activity and pricing patterns over the next month or two. 

While there has not been any significant slip detected in grassfed slaughter cattle condition yet, one Queensland processor suspected it might not be too far away, if it stayed dry. Offsetting that, there are more supplemented cattle evident in kills in the past week or two.

Reflective of the dry start to spring, fading restocker demand has been one of the main contributors to lower young cattle prices in recent weeks. The EYCI finished yesterday at 362.75c/kg about 7pc or 30¢ below the corresponding day last year.