Dollar could again pressure kill rates

Jon Condon, 25/10/2011

A renewed surge in the A$ and a more consistent flow of slaughter cattle could put an end to the recent sequence of rises in direct consignment meatworks prices, and perhaps build a case for some easing in rates if the A$ stays high, analysts say.

At the risk of being accused of talking the market down, the 5.5c lift in the A$ value against the greenback in the past fortnight could now mean that producers have seen the best of the recent grid prices, if the currency stays well above parity.

Yesterday morning, Beef Central’s Westpac source quoted the A$ at US103.31c, but it rose even further through 104c during daily trading and opened this morning at US 104.67c. Last Monday week, it sat at US97.75c.  

One economist on Friday described the A$ as ‘jumping up and down on the spot’ as it gyrated wildly on an almost daily basis last week in a 1.5c range. As has been said on Beef Central previously, the one feature export meat traders fear more than a high A$ is a volatile A$, and it has now been some months since the currency could have been referred to as ‘stable.’

That’s being driven most by daily updates about the parlous state of debt-stressed European economies, economists say.

There were no major changes in either JBS Australia or Teys Australia slaughter price grids for prime or manufacturing type cattle in the week ended yesterday, as ‘adequate’ cattle flows largely met export processor demand. In southern regions, some areas are starting to dry-off with hot, summer-like days experienced over the weekend, and processors are seeing that reflected in supply.

“If you were gambling man, you’d say the next grid price move would be south,” a credible source told Beef Central yesterday.

The NLRS Eastern States slaughter report for the week ended Friday produced a kill of 136,663, virtually unchanged from the previous seven-day cycle, but still the second largest kill seen in the past 15 weeks.

All the major processing states displayed stable rates of kill, within two percent of last week’s activity.

The only outlier to that was Tasmania, which recorded a 10 percent rise to 3961 head.
Peter Greenham, whose operates the HW Greenham & Sons plant at Smithton, said Tasmania’s spring kills were starting to pick up, but were still well-back on same time last year (-8pc last week, in comparison to the same slot in 2010) due to a wonderful season.

“We do not expect to see really see big numbers for a few more weeks yet,” Mr Greenham said.

Queensland’s kill last week sat at 71,317 head, down 1pc on the seven days previous, but still 5pc shy of the same week last year. The female component continues to be low, representing just 43pc of total state throughput. The week previous it was even less at 41pc, as the effect of herd-rebuilding pressure continues.

One multi-site export processor said a symptom of the female retention trend in Queensland could be a ‘gentle spike’ in supply of cull cows in the latter half of next year, as producers who this year squeezed an extra calf out of older cows finally adjusted their herd age profile. The quality of the season this year had also made that old cow retention decision easier.

“But those aged females will be another year older in 2012, and regardless of how good next year’s season is to nurse them along, many producers will need to move them on,” the processor said.

Last week’s kill in NSW reached 34,427 head, up 1pc on the week previous, but down 1pc on the same week last year. Victoria (19,268 head) and South Australia (7690 head) also registered stable kills, up 1pc and 2pc respectively.

Meat wholesalers and traders are now starting to turn their attention to domestic beef supplies heading into summer, with a traditional build-up of beef stocks for summer barbecue season, and the normal seasonal close-down of processors. The growing prospect of another very wet summer could see larger than normal stocks put aside, in defence against weather-driven processing disruptions, one source said.

“It’s this time of year when you have to get a bit of meat around you, moving into Christmas trading,” one contact said. “Kills have been short, with many processors losing days, but supply is now better matching demand.”

One meat trade source suggested yesterday there was a prospect for more export beef to again flow back into the domestic trade, which was heightened while ever the A$ sat above US103c.

“If people can get anywhere near a similar price, more beef will end up on the domestic market, to escape the currency effect. But it’s a fine line between solid supply and oversupply,” he said.

“Not panicking is the key, and keeping the trade informed about what’s going on.”

“The trade has to get past these first couple of weeks in November. Then it hits a rocky patch in demand, because consumer’s attention starts to drift to ham and turkey, but it come back again straight after the festive period. But wholesalers need to build stocks, because many processors traditionally have a couple of weeks off.”

'Lighter' MSA beef in short supply

Several credible meat trade sources said an issue this summer could be in access to quality yearling-weight beef in certain cuts, particularly cube rolls.

“There’s a lot of heavier meat around, because the big season across Eastern Australia has meant cattle have done so much better than expected. Big carcases mean big cube rolls, which can get too large for the domestic market. Nobody wants a cube-roll steak that spills off the edge of the plate,” a source said.

This meant lighter meat (YG and Y type carcases, especially MSA) suitable for producing the right portion sizes in cuts like cube roll (scotch fillet) was likely to be at a premium going into the summer period, and that could be reflected in price.

A second MSA processor agreed with that assessment, saying better quality yearling could be a difficult market segment to fill over summer.

  • • The NLRS Eastern States Young Cattle Indicator closed yesterday at 396.5c/kg, down 0.75c from a week earlier. The heavy steer indicator (194.3c) was down 3c, and medium cows (151.9c) were -1c on a week ago. 


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