With less than a fortnight before many larger Queensland processors stop for their seasonal break, weekly kills have again ramped-up as exporters aim to build beef inventory to carry over during the holiday period.
Last week’s kill reported by the National Livestock Reporting Service reached 145,726 head – easily the largest tally for the year – and symptomatic of the deteriorating seasonal conditions across large parts of Eastern Australia. It also reflects the looming processing season closure in Queensland, which accounts for more than half of the nation’s beef kill.
Most Queensland plants operated by JBS Australia, Teys Australia and Nippon Meats Australia will cease killfloor operations on Wednesday or Thursday next week, December 19 or 20, with final boning room shifts and load-outs completed by Friday, December 21.
Scheduled re-openings in 2013 will vary, with many circling Monday, January 7 or January 14 as likely commencement dates, subject to weather.
One exception is Teys Australia, which plans to return to work on January 21 at all Queensland sites bar Biloela, after its customary four-week break. Teys’ southern operations, which will take gazetted holidays only, will help fill the gap during the closure period.
To put last week’s kill performance into perspective, it was only the fifth time this year that Eastern states processing throughputs have exceeded 140,000 head, and three of those have come in the past month.
The big shift came in Queensland, where kills lifted 7pc to 76,523 head. That figure, 12pc above this time last year, is also among the biggest kills for the state in 2012.
Part of it can be explained by the return to work after a week’s break by Brisbane’s Australian Country Choice plant, killing exclusively for Coles Supermarkets, re-introducing 5000+ to the state’s tally.
Other larger Queensland plants spoken to yesterday confirmed that they are near capacity, putting export beef aside for the closure period. The passing of industrial action, curbing productivity at one large site, has also helped lift the state’s recent tallies.
Surprisingly, the heatwave conditions across parts of Queensland last week did not put a significant dent in cattle processing, as some had suspected. Easy-to-access feedlot cattle may have partly filled that gap.
Queensland numbers will inevitably start to drop from this week, however, as one or two large export sheds like Teys Biloela have now started their holiday break.
The increasing numbers story last week was repeated in all other states bar South Australia, which was unchanged on 8466 head.
The NSW kill was +2pc at 34,222 head. Worth noting is the sharp rise in females as a proportion of the state’s kill – close to 44pc last week. That’s another symptom of dry weather across large parts of the state.
Victoria recorded a tally of 22,173 head, +1pc on the previous week and +8pc on a year ago, while Tasmania was also experiencing high rates of kill at 4342 head – +5pc on a week earlier and +16pc on this time in 2011.
Saleyards log declining numbers
Big reductions in saleyards throughput in Queensland, NSW and Victoria were experienced last week, with Queensland yardings falling from 21,700 a week earlier to 12,700 head last week, partly due to the extreme heat conditions being experienced.
The big decline in supply contributed to some higher saleyard cattle prices last week. Heavy steers finished the week 4¢ higher on 319¢/kg, while trade steers nationally increased 5¢, to 336¢/kg.
Most Queensland meatworks grids remained unchanged last week, however, with processors reporting solid bookings through to next week’s closures. MLA reports some southern processors also solidly booked for the remainder of 2013.
Reflective of the drying conditions, however, today’s Roma store sale is expected to carry more than 8500 head, including some large lines of females and steers.
US grinding meat prices continue to climb
Prices for imported 90CL grinding beef in the US reached A424c/kg last week – a record for the year and the highest seen since a brief spike at 425c/kg in November last year.
In US$ terms (expressed in US$/cwt) last week’s imported 90CL price hit an all-time record high of US$219/cwt (click on Steiner graph below).
Analysts in the US reported imported manufacturing beef prices last week continuing to climb, although volume was reported as quite light, as end-users continued to be “taken aback by the pace of price appreciation.”
Steiner’s weekly report said market participants indicated that some shorts in the market were also covered, helping slow down the rapid increase that imported beef values have recently displayed.
Australian offers remained ‘very firm’ in light of looming summer holiday plant closures (see comments above).
“Also there continues to be a lot of talk in the market about more Australian beef currently going to other markets. China demand for Australian beef has suddenly become a hot topic as it emerged as one of the top destinations for Australian beef in October and November,” Steiner said.
“However, keep in mind that much of the grinding beef going to China is fat beef trim. For that matter, lean and extra lean beef remains a product that goes to North America to balance the supply of fat beef trimmings here.”
“This is a fact that does not get the proper attention it deserves,” the Steiner report said.
“The price of lean beef in the US is a function of overall demand for ground beef but it also is impacted by the availability and value of fat beef trimmings. As previously noted, the fact that fat beef trim now is running well below year ago levels continues to be supportive of lean grinding beef values. And with lean and extra lean domestic supply tighter than a year ago, it makes sense that end-users are willing and able to pay more for lean/extra lean imported cow meat.”
Steiner provided a useful example to illustrate the point:
To formulate a 76CL meat-block (considered the ideal lean meat/fat ratio to produce the perfect burger pattie), a grinder need 65pc 90CL beef and 35pc 50CL (fatty domestic trim) beef.
This time last year, the price of 50CL beef was quoted at $106/cwt, while last week the quote was $79/cwt, down 25pc from a year ago.
At the same time, the price of domestic fresh 90CL beef is up about 9pc from last year while the price of frozen imported 90CL beef is up 7pc from last year.
“As a result, the cost of the hamburger patty in the US today is almost exactly what it was a year ago,” Steiner said.
Going forward, there continues to be plenty of debate as to whether imported 90CL beef trim values will continue to climb and if so, how much.
In Steiner’s chart (click on image below), it can be seen that the market often hits a peak during the January-March period.
“In the last three years, we have seen about the same pattern repeat, with prices in March up significantly from December levels,” the Steiner report said.
In 2009, prices at the beginning of December were $139/cwt and peaked in early April at $177 (a 33pc increase). In 2010, a 13pc increase was seen over the same period, and last year, a 6.4pc increase.
In part the slower pace of price increases in 2011 was due to a sharp increase in supplies of Australian and NZ beef.
“Significant price appreciation in the US market should once again bring more lean grinding beef to the US. But the key is: higher prices will be needed to a) ration US demand and b) increase supplies from traditional partners,” the Steiner weekly report said.
“Even a 5pc increase between now and the end of March would push imported beef values to around $230/cwt, a reasonable expectation considering the seasonal reduction in domestic supplies.”
“Australia and NZ can supply more beef to the US, but each additional pound that will have to come to the US will likely require a higher price. Demand is not a linear function and supply is not linear either.”
Cheaper domestic 50CL beef would also have an impact on prices for lean beef in the January-March period.
“US cow meat supplies will remain critical in the coming months and directly impact the magnitude of price appreciation,” Steiner said.
US beef cow slaughter for the period Oct 1 to Nov 17 (latest data) was 518,200 head, down about 75,000 head or 13pc from a year ago.
Some of that decline was offset by more dairy cows going to market. During the same period, dairy cow slaughter was 444,000 head, 32,000 head or 8pc larger than a year ago.
In total, US cow slaughter during this period declined about 4pc from last year.
The Great Plains region continues to struggle with drought conditions and there are reports that some areas in the US Southern Plains are also starting to show strain.
With high forward cattle prices and tighter female supplies, US cattle producers will be reluctant to sell stock for slaughter.
“If moisture conditions improve, we could see a significant decline in the number of cows offered for sale, implying even higher lean grinding beef prices will be required to fill the gap,” Steiner said.
“We are already seeing more US steer and heifer product going to the grinder in the absence of LFTB – a trend that could accelerate next spring if 90CL values approach the $240-250 range,” the report said.
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