Could the worst of the national beef kill slump experienced over the past three months now be behind us?
Momentum appears to be slowly rebuilding in national beef slaughter rates, which continued a steady upwards trend last week after a 10-week slump driven by easing in the value of the A$, flat international demand and signs of clearing of the earlier beef surplus in cold storage.
The East coast states adult cattle kill for the seven days ended Friday (August 12) reached 126,288 head, up 1.5 percent from the previous week when the tally reached 124,552 head.
Queensland’s kill lifted by another 1pc from the previous week to 67,312. While that figure was in fact 4pc better than the same week last year, the 2010 figure was atypical of the period, impacted by local Show holidays in the Southeast Queensland region, affecting a number of large regional abattoirs.
This year, that impact might be seen in the current week’s figures, as Show dates are a little later than usual. JBS Dinmore had a dark-day on Monday for its show holiday, for example.
Most Queensland plants killed five days last week, although many are still to approach capacity throughput, and a couple have reduced from seven-day to five-day operations. There are still some short-term closures ahead, including Warwick Bacon/John Dee at Warwick, scheduled to close for a fortnight.
Slaughter rates in southern states were mixed last week. Cold and very wet conditions in some areas obviously influenced cattle movements.
Numbers in NSW were down 2pc to 34,364 head, while Victoria’s kill improved 1pc to 16,316 (still down 6pc on same week last year). Nippon’s Wingham plant reduced staffing levels last week to reflect the current market circumstances. There have also been reduced kills recently at Cargill sites at Wagga and Tamworth.
In Tasmania, the seasonal impact was still being seen with the weekly tally of 2964 being 25pc below this time a year ago, while South Australia’s figure of 5332 is still 21pc below last year, partly due to the extended seasonal closure of Teys Naracoorte due to a refurbishment project in the by-products area.
Generally speaking, the flow of cattle across the East Coast was significantly improved from a week earlier, one major processor said yesterday.
Solid rise seen in OTH rates
The softer, although still choppy, value of the A$ has been a contributing factor in a 5-10c/kg rise in direct consignment slaughter cattle rates since Monday last week. JBS, Teys and Nippon have lifted over-the-hooks rates on a wide range of slaughter-ready stock.
In general terms (some variances to this), rates in southern Queensland plants rose 5c/kg on Monday this week, on top of another 5c/kg a week earlier. While that may be enough money to stimulate some producers to ‘sell a few cattle’, it may not yet be enough motivate them to ‘race out and muster a paddock,’ one contact said. Cash flow may be an issue in some cases.
The 100-day four-tooth grainfed ox figure Southern Queensland is currently around 340c spot price, with up to 360c/kg for flatbacks going into sites like Beef City. Grassfed Jap ox four-teeth are at 320c/kg also up 10c, while good meatworks cow is up 5c to around 305c.
“That increase is being driven by three factors,” one reliable Beef Central contact said.
“The lower A$, giving exporters some relief, is the first. The second is the general shortage of numbers (reported in Beef Central’s article yesterday, ‘Where are all the cattle?’); and the third is the elevated optimism in the trade, driven partly by signals that the backlog of beef held in cold storage due to flat earlier demand overseas is beginning to clear.”
“Our meat sales team was cautious-to-carefully optimistic last week, but that optimism has strengthened a little more this week. That mood is being supply-driven, rather than demand driven, as the cold-storage factor is definitely starting to shorten-up. That had to happen sooner or later, when you look at the Queensland kill in the mid-60s for the past number of weeks,” he said.
Speed-bumps still ahead
Before we get too far ahead of ourselves, however, there are still some big speed-bumps ahead on export outlook out of Australia. Here’s just a couple of examples to consider.
Beef stocks in Japan at the end of June increased further on the back of subdued consumer spending, ongoing food safety incidents and rapidly rising imports from the US. Japan’s ALIC estimated beef stocks (domestic and imported) in June reached 91,877 tonnes, up 19pc year-on-year. Imported frozen beef inventory (71,173 tonnes) was up 27pc year-on-year, the highest figure since March 2003 during the BSE era.
Besides slow beef consumption in the market, the increased Japanese imports from the US have added pressure to stock levels. January-June imports from the US totalled 51,680t, up 50pc on last year. Japanese consumer sentiment towards beef has also been impacted by the radioactive contamination issue, first reported in Beef Central back in mid-July.
A$ volatility makes trade gun-shy
Turning to export outlook in other markets, the recent extreme volatility in the A$ is making both Australian exporters and US customers for grinding beef gun-shy. With a breathtaking 10pc adjustment in the A$ in a week, and continued erratic performance since then, Australian exporters trading 90CL cow beef into the US are fragile souls at the moment. Some possibly need counselling.
The imported 90CL cow beef indicator in A$ terms last week lifted 5pc week-on-week and was 7pc above year-ago levels. Only three weeks ago, the indicator in A$ terms had dropped 2pc week-on-week, and on 2010 levels.
This has created enormous uncertainty in the US market for both Australian exporters and US end-users, coupled with higher US cow slaughter due to drought and softening food service demand.
The Eastern States Young Cattle Indicator closed yesterday at 382.75c, leaping 8.5c on a day earlier and up 8c on a week ago.
- JBS last week advised livestock suppliers of a change to its livestock payment terms, from 7 to 14 days. Terms across the industry typically range from 7 to 14 days. Teys pays once weekly, effectively meaning from 5 to 11 days. The move will obviously represent a cost saving to JBS, but it has been widely accepted across industry without concern, gauged by feedback sought from producers attending Brisbane Show last week.
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