Beef cattle processing throughput dipped sharply last week due to a combination of ANZAC Day, widespread rain across Queensland, and a new, recently unseen cause – industrial unrest.
Last week’s NLRS Eastern States slaughter report produced a tally of 116,344 head, a 16 percent fall on the previous five-day week, which came as no great surprise given the Wednesday holiday.
What was surprising was the development of an unseasonal Eastern Australian weather influence that dumped 25-70mm of rain across a vast expanse of country from the Barkly Tableland to below the NSW/Qld border, slowing down cattle movements during the back end of the week.
The weather influence put a handbrake on the big surge in cattle movements being witnessed earlier, and produced a soft 5c rise in some southern and central Queensland grid prices this week.
Last week’s kill saw declines in numbers in all Eastern states, ranging from 15 to 32pc on the previous weekly cycle.
The weather influence will spill-over into this week’s processing activity, with several sale cancellations, and reports of skipped shifts at central Queensland factories yesterday.
Another impact will come from a six working day closure of Nippon Meat Packers Australia’s Oakey export plant, due to industrial action (see this morning’s separate story). The AMIEU walk-out, which started on Friday, suggests the Oakey chain will not start to roll again until May 7.
Offsetting that, to some extent, will be the return to work this week of the grained specialist Kilcoy Pastoral Co plant, after an extended lay-off since Easter.
This Friday will also see disruptions in some NSW plants due to a Butcher’s Picnic holiday.
Beef 2012 will impact cattle flows
There will be some disruptions in Queensland again next week, for very different reasons.
Monday, May 7 is a Queensland Labour Day holiday, with some plants having a scheduled lay-day. The same date also marks the start of the Beef 2012 industry expo in Rockhampton, expected to pull an audience of around 70,000 stakeholders.
“Don’t under-estimate the impact that the Beef Expo can have on cattle flows next week, as producers and their staff are away from home, and mustering gets put on hold for a week,” one leading processor said yesterday. “We saw the same effect in 2009, impacting saleyards and direct consignment numbers and it is likely to be even larger this year.”
A bit of tractor activity planting oats after last week’s rain could also curtail cattle movements a little this week.
Combining all those influences would suggest the week starting May 14 could be the next real gauge of ‘true’ cattle numbers hitting the market, as conditions dry-off and winter frosts start to bite.
On a state-by-state basis, Queensland’s processing throughput last week reached 61,863 head, a 15pc decline on the week previous.
In other states, the NSW kill last week also fell sharply to 28,349 head, a 17pc decline, while Victoria processed 16,571 head a drop of 16pc. South Australian numbers fell 17pc to 5700, while Tasmania was minus 18pc at 3861.
Some grids respond to softer supply
Southeast Queensland grid prices this week are unchanged to 5c dearer, in response to the immediate weather-driven supply shortage, but not reflective of the broader market sentiment.
Larger Southern Queensland export plants contacted yesterday were offering around 360c/kg EU; 340-350c MSA (+5c); 325c 0-2 tooth grassfed ox; 320c 4-tooth; 315c 6-tooth (all +5c in places); 295c best cow. Mark down 10c on most of those rates for CQ plants.
Southern saleyards markets early this week were reported as ‘very dear’ as supply showed a big correction after a big throughput the previous week. Numbers at Forbes yesterday were back about 30pc on last week, while Pakenham was halved in size.
BSE news impacts grinding beef trade
In overseas meat market developments this week, prices continue to ease for 90CL imported grinding beef into the US, quoted this week at A402.1c/kg, down from recent highs above A418c.
That came despite higher prices for US domestic product and an overall shortage of lean grinding beef, with market participants indicating US bids for out-front deliveries are limited. Many end-users are opting to sit on the sidelines, analyst Len Steiner said on Friday.
An obvious conclusion over the current price trend, and reluctance to cover out-front needs is last week’s announcement that a new case of atypical BSE had been found in the US.
Following the news, US live cattle futures dropped the daily permissible limit. They rose again on Wednesday but turned negative again before the end of the week.
“In that environment, it is difficult for end-users to book product that will deliver after Memorial Day holiday. While some buyers will always purchase product out-front, they may be less inclined to do so now than in previous years, given the bearish turn in US beef prices,” Mr Steiner said.
US domestic lean 90CL beef quoted on Friday at US$2.25/lb was trading at a premium to imported product, which came as no surprise for this time of year. Imported prices at this time of year traded at an even bigger discount in 2005, 2006, 2007, and 2009. The only time in recent years that the discount disappeared was in 2008, when imported beef supplies all but disappeared and again in 2011, when Australian beef shipments to the US hit a 30 year low.
With more imported Australian beef becoming available, it appeared that price patterns might be returning to more normal trend. At some point the discount on imported beef to fresh US domestic beef would become large enough to induces more end-users to bid for imported product.
“We may not be at that point yet, but as domestic lean beef prices escalate, we expect demand for imported grinding beef to improve,” Mr Steiner said. “But at this point, the gap between imports and domestic 90CL remains quite large.”
US cow meat supplies have been well below year-ago levels for much of April as good rains in the US Southern Plains have brought some relief for beef cow producers previously afflicted by drought. Weekly US cow and bull slaughter is currently around 124,000 head/week, 5.3pc lower than the same period a year ago. A big dairy cow kill is offsetting that, to some extent.