Processing

New financial year contributes to higher kills

Jon Condon, 10/07/2012

 

There was a general strengthening in slaughter numbers across the Eastern States last week, aided by drier weather conditions, and cattle marketing decisions based around the start to the new financial year.

The National Livestock Reporting Service’s slaughter report for the week ending Friday shows a five-state eastern kill of 138,543 head, a four percent rise on a week earlier and the highest weekly tally seen since late May.

Queensland’s figures were surprisingly strong given the current impact being experienced from industrial action. The state recorded a seven days kill to Friday of 69,911 head, 3pc better than a week earlier, despite the stoppages experienced on Thursday (four hours) and Friday (full day) at JBS Australia’s Dinmore plant, the nation’s largest beef processing site.

A further four hours was lost yesterday, Monday, as part of the ongoing AMIEU action at Dinmore.

The strong overall Queensland result would suggest most other sheds were operating closer to full capacity than has been seen earlier. The generally drier conditions across the state last week has definitely improved access to cattle, and saleyard numbers, following the earlier sequence of wet weeks.

Another factor put forward by stakeholders was the start of the new financial year, with some producers holding cattle back for tax reasons. This income deferral often produces a small spike in numbers early in the new fiscal year cycle.

In other states, Victoria recorded a huge 31pc increase in meatworks throughput last week to 26,110 head, after a particularly quiet week leading up to June 30.

New South Wales went against the higher trend, recording a soft 2pc decline last week to 32,125 head – but still 14pc behind this same week last year. South Australia is now in the middle of its cyclical season decline, struggling to find killable cattle, recording a 14pc decline last week to 6490, while Tasmania was much the same, sliding 14pc to 3907 head.

More wet weather forecast across Eastern Australia later this week could again put a handbrake on kills – most likely to affect next week’s numbers than the current cycle, processors say. That is especially so, as much of the country has not yet properly dried out from the last rain episode, and won’t take much to get boggy again.

As the current storm rain influence pushes across from the far west, Queensland centres like Boulia and across the Channel Country have already recorded 10-40mm, with more to come through to Friday. Oats cattle are still probably a month away from market, but those producers with oats crops will now be looking for six weeks of fine weather to escape the risk of rust, and to ‘harden-up’ the crop a little, necessary to extract maximum weight.

As reported on Beef Central yesterday, the Bureau is forecasting rain right across NSW and into Victoria also this week.  

The difficulty in raising killable cattle in central and southern NSW and Victoria at present is in clear evidence, with saleyards cattle returning big money in recent days. Reports suggest some lighter trade-weight cattle were making 210-215c liveweight in places in recent days.

Nippon’s Wingham plant in NSW, for example, reported being “really tight” for numbers this week. Southern processors also continue to shop a little further north each week, as the growing price distinction, north-to-south, makes longer-distance freight rates look more attractive.

In southern Queensland, processor grids again remained largely unchanged last week. With margins turning sour for many export beef propositions, many processors appear content to ‘put the cue back in the rack’ for a week or two, rather than compete too strongly on stock. Expect to see 315-320c/kg on four-tooth grassfed Jap ox; 5c better on milk and two-tooth ox and cows 280-295c. MSA grassfed steers (boning groups 1-10) sit at 330-335c, with EU steers currently around 350-355c/kg.

The prices being paid for saleyards and slaughter cattle at present are again falling out of sync with international and domestic market demand, and it can only be a matter of time (and drier weather) before adjustments take place.

This is especially so, given the A$ recently-found level well above US102c. Processors continue to tread the fine line between the need to operate at higher capacity utilisation levels, while also getting closer to, or indeed making a margin on each beast processed.

A currency comparison rarely discussed, but which is also now hampering trade is the A$-to-Euro conversion. The Euro is currently sitting at around 83.5c – close to a record, and up from 78c earlier. This is knocking around Australia’s ability to compete in the European market, particularly for grainfed.

Japanese and Korean trade last week also remained very flat, and the US grinding meat market continues to fall away from the lofty heights seen earlier this year (see Beef Central’s home page 90 CL graph). The 90CL figure is now 8pc below its recent highs seen in May, and the decline in value for 80CL and below is even worse, as the lingering effects of the Lean Finely Textured Beef episode influence US manufacturing beef trading patterns.          

Surprisingly, given the season, processors of export cattle are not reporting particularly heavy weights in slaughter cattle so far this year. One large Queensland export plant is actually behind 2011 in carcase weights, year-to-date, but this assessment is in the context that last year was also a very good year, season wise, in many districts.

The big run of Queensland cattle is now likely to emerge August/September, observers say. That goes somewhat against a small lull often seen during the August period.

Just one of the contributing factors behind that will be the return to rail services out of central western rail-heads including Winton, following post-flood bridge repairs, and train service suspensions over bridge safety concerns on Friday. The Winton to Longreach line was closed in February when flooding damaged the Darr River bridge. That rail-head, alone, normally accounts for 90-100,000 cattle shipments in a typical year.

With a solid feed reserve in place, many northern producers are biding their time, hoping for a turn in cattle prices after Brisbane Show in mid-August.  

 

Overseas meat markets:

Trading in imported Australian beef in the US was limited last week, with little interest shown in forward bookings. Modestly lower prices for competing US domestic lean grinding beef and a stronger Australian currency provided further headwinds for imported beef business, analysts said.

Even as offerings from Australia have eased lower, they still remain well below where some US end-users are bidding. With little room in their margins, overseas packers in Australia and New Zealand continue to run light production schedules, US analysts reported.

The latest data from New Zealand showed bigger slaughter than a year ago but that is mostly for product that already has been booked. NZ packers are coming into their slowest time of year, with slaughter there expected to decline sharply in the next six weeks. This makes it unlikely that NZ exporters will try and secure more business at lower prices in coming weeks.

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