Processing

Kill shows signs of shortening as northern, southern cattle flow wanes

Jon Condon, 09/07/2013

 

There were no real surprises in a four percent decline in throughput in last week’s eastern states beef kill.

The signs of a commencement of a softer trend in processing activity have been in evidence for some weeks.

While store market trading is still very active, with +11,000 head yarded again for today’s Roma store sale, there has been a distinct slow-down evident in killable cattle supply pressure in both Queensland and southern states recently.

As a result, a number of large export processors have now discontinued weekend and overtime work, activated earlier to cope with the huge flow of cattle across Eastern Australia seen since March. That’s partly driven by the additional labour penalty involved in such kills, but also the slackening in supply pressure to more manageable levels, major processors say.

Adding to this, forward booking congestion for killing space in Queensland plants is now much less that what it was. One contact suggested forward bookings were now available three weeks hence in Central Queensland plants, and just a week-and-a-half to two weeks in southern Queensland.

‘Doubling-up’ of kill slots at more than one plant perhaps made the earlier situation look worse than it was, especially where slots were being booked without a price.

All mainland states showed a pronounced easing trend in kill numbers last week, the NLRS weekly summary issued yesterday afternoon shows.

Queensland’s kill eased 4pc to 78,763 head – its lowest weekly result barring holiday-shortened and rain-impacted seven-day cycles seen since March.

“The excitement seen earlier to kill the house down is definitely easing,” one large processor said.

NSW and Victoria were both 3pc lighter than the previous week’s kills, at 35,509 head and 23,624 head respectively. More rain across areas of NSW last week probably contributed to that pattern.

South Australia declined even further, falling 8pc to 6899 head.  While some service kill and hot-boning plants in southern states continue to process at high rates – partly due to extreme high prices for hay, which is forcing some dairy cow liquidation – others have now started their seasonal decline in earnest. The start of four-day weeks at some southern processing sites – not uncommon for this time of year – might not be far distant, a processor source suggested.  

The only rise in kill numbers last week came in Tasmania, which lifted 3pc to 4825 head for the week.

 

Grid prices continue to recover 

Some southeast Queensland processor grids went up another 5c/kg on Friday, with 0-2 tooth heavy grassfed steer now typically around 315c, four-tooth 308-310c, and best cow 265-275c. That cow price, hit hardest during the recent oversupply period because of numbers being presented, has now lifted at least 20c/kg in the past four or five weeks, from a low point of 245-255c. SEQ MSA grassfed steer price sits this week in a range from around 228c-240c.

Supply prospect-wise, Queensland processors are banking on a start for oats-finished cattle over the next month or so, given this year’s excellent crops. Also likely to activate soon will be a strong turnoff of heavy, well finished grassfed cattle out of in Central Queensland’s buffel grass country, which received the best of last summer’s rainfall distribution.

Grid prices in southern states have now swung higher than those in southern Queensland due to normal seasonal supply issues, with evidence of southern processors pressing into tick-free sales as far north as about Dalby, to supplement their local kills.

 

US 90CL market

There is little doubt that the continuing easing trend in the A$ value is helping instil some confidence, and better prices, back into the supply chain.

The further improvement in the currency value has been clearly reflected in US 90CL grinding beef price, which last week reached 404.1c/kg FAS in A$ terms. That’s the first time it has gone above 400c/kg since March. The trade says this lift was explained entirely by currency movement, rather than any rally in US demand, which has otherwise been very flat.

Illustrating just how much the currency holds sway over price trends, in US$ terms, the 90CL price actually fell last week by 1.5c/lb, to US179c/lb.

Domestic US beef stocks remain well supplied, and now look likely to remain so for the rest of the northern hemisphere summer, analysts said on Friday. This continues to limit demand for additional imported beef, along with a risk-averse trading environment, which has discouraged forward orders and weakened price discovery.

Another factor holding back lean manufacturing beef prices is the high price of domestic US fatty trimmings, with 50CL beef currently almost double the price it was this time last year. With Australian lean manufacturing meat typically blended with US fatty trim to produce the perfect pattie, this lifts the overall price of ground beef, making it less competitive over other proteins like chicken and pork.

There is some hope among Australian exporters that US domestic supplies may not increase as much as they normally do in the northern hemisphere autumn, thus helping underpin Australian lean grinding beef values.

However, recent trading patterns have created an environment where the first priority is to limit exposure to currency risk. This tends to feed on itself and so far has kept imported beef prices on the defensive.

On the upside, US foodservice business has improved in recent weeks and the expectation is that this could support better demand for grinding beef in coming months.

 

Clarification:

A representative of Bindaree Beef has contacted Beef Central seeking clarifications or corrections on several points in last week's article, "Bindaree Beef scores unprecedented $23m grant for carbon project." Beef Central is happy to oblige:

  1. There was no Federal Government funds involved, as published last week, but was limited to Queensland Government funding only.
  2. Despite a comment made to the contrary by Qld's Premier of the day, Peter Beattie, none of the funds provided were for 'environmental' projects, but for labour enhancement and training.
  3. The direct sum of money received by Bindaree Beef was $800,000, not 'millions of dollars' as published in the earlier article. Other projects discussed at the time, including value-adding rooms, did not go ahead. A further $1.7m expenditure was announced at the time by Premier Beattie for an upgrade of Murgon's water supply, of which Bindaree was just one beneficiary. 

Given that the events happened 13 years ago, and Beef Central was relying on memory, we are happy to accept the points raised by Bindaree Beef.

  • See this morning’s separate wholesale market summary.

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