Processing

Qld surge sets-up year’s biggest kill

Jon Condon, 20/03/2012

 

The Eastern States beef kill reached its highest level for the year last week, driven largely by a big rise in throughput in Queensland and to a lesser extent, NSW.

The national kill recorded by MLA’s National Livestock Reporting Service hit 133,779 head, a 4.5pc rise on the previous week, and the highest throughput seen since November, as rain and flooding issues started to clear. 

Queensland has effectively reached its first ‘full’ kill for 2012, delivering a throughput of 78,158 head last week – a big, nine percent increase on the previous weekly cycle. Such kills are not uncommon in Queensland by late March, however, as normal seasonal turnoff patterns start to kick-in.

Cash flow issues may also have been a factor in some suppliers’ minds, after a quiet two-month period, and some prospects for further wet weather supply delays ahead.

The bean-counters in Queensland processing businesses will be smiling, because processing efficiency rises significantly as abattoirs approach operating capacity. 

While NSW also recorded a 9pc rise in rate of kill last week, to 29,952 head, this was coming off a lower base, and was in fact still 17pc behind this time last year.

There are still a lot of road closures due to flooding in parts of NSW, with problems around Hay, West Wylong and the Newell Highway. The Lachlan and Murrumbidgee catchments generally are still experiencing flooding, which is expected to further impact cattle supplies in the short and medium term, although NSW grazing conditions will be favourable heading into the colder months.

More wet weather ahead

The sudden spike in Queensland kills last week may not last long, however, as processing later this week looks likely to be impacted in large northern and central Queensland plants by the effects of the tropical cyclone in the gulf, which has dumped up to 250mm on some areas in the past two days. Plants in Townsville, Mackay, Rockhampton and possibly Biloela are likely to come under extremely heavy supply pressure later in the week.

Heartland cattle country around Clermont, Emerald and west of there have already received 125-150mm, with more rain forecast. Rail access between Emerald and Longreach was also knocked out for some days. Northern coastal areas have in many cases received much more.

Already Longreach sale is cancelled this week, and numbers at Roma sale are likely to be well-back, agents say.  

In contrast with Queensland and NSW processing trends, kill tallies in southern states last week all fell significantly due to a combination of wet weather and public holiday disruptions.

Victoria eased 6pc to 16,552 head, mostly weather-related but also due to a Labour Day holiday last Monday. South Australia crashed 21pc to 5571 head, and Tasmania was down 13pc to 3546 head, for similar reasons.

The declines in processing activity in the three southern-most states took the edge off what would otherwise have been a very substantial national kill rise last week.

Meatworks direct consignment grid prices reflected the easing in earlier supply problems caused by weather, with southeast Queensland’s ‘big three’ all adjusting some rates downwards by 5c/kg on a range of process cattle.

Quotes seen by Beef Central yesterday included four tooth Jap ox, 340c/kg; 345c for milk and two teeth; and 320c best cow. MSA steer grassfed is currently around 358c to 363/kg on grids regularly monitored by Beef Central, with 100-day grainfed ox 355c. There appears to be a push on at present for EU grassfed steer, with grid prices reaching 365c/kg.

Those downwards adjustments would suggest that producers may now have seen the best of the recent grid price rises linked to rain-induced cattle supply shortage, and prices may again be heading south. The only impact likely to change that trend could be further weather disruptions, as discussed above.

LFTB shockwaves continue

In meat market news, as reported in last week’s kill summary, the shockwaves behind the sudden abandonment of Lean Finely Textured Beef by US ground beef end-users continue to reverberate.

The price of 90CL lean ground beef without LFTB is already is 16 percent higher than the price of LFTB-included, and the spread is expected to widen in the coming days and weeks, US trade sources suggested.

The huge US National School Lunch program has joined the list of end-users affected by the public backlash over LFTB, following negative media reports. Thousands of schools involved now have the choice of ‘with, or without’ regarding LFTB, at a price.

“We know it’s a rising issue, and one we’ll have to work on with school districts, so they understand the cost implications” a USDA representative said.

US imported beef prices last week were modestly lower, largely due to end-users pulling-back and opting to sit on the sidelines in light of escalating lean beef prices. There is a growing disparity evident between the price of lean and extra lean beef in the US wholesale market, viewed from a point of lean perspective, and the price of fatty domestic trim such as 65CL and 75CL.

While some of this is connected to the significant rise in the weight of US cattle coming to market (see below), it is also due to the impact of the recent media firestorm regarding LFTB, which generally performs around 95CL or higher.

“By deciding to drop the use of LFTB, end-users effectively did two things,” CME’s Len Steiner said last week.

“First, they shifted a notable part of their demand to the market for lean domestic and imported beef. We can see the added demand when considering that lean beef prices have been steadily increasing, despite higher imports from Australia and only modest reductions in US domestic cow slaughter.”

“The second impact concerns a potential increase in the supply of fat beef trimmings in the marketplace. The BPI product is the result of extra fatty product (30CL or so). The reduction in the demand for this product likely has caused packers to change how they run their trims and likely has pushed more product into the 50CL category.”

The price of fatty 50CL US domestic trim last week was US90c/lb, about 10 cents lower what it was at the beginning of the year.  The price of 90CL boneless beef, on the other hand, was quoted as high as US$2.24/pound on the top side, or $2.17/pound weighted average.

“It remains to be seen what the full impact of the BPI situation will be,” Mr Steiner said.

“For the moment, we think the situation has limited the overall supply of lean beef in the US market and shifted some demand to the imported beef complex. It also has increased the supply of fat trim, helping contain prices there despite record high cattle prices.”

Mr Steiner reported that the reduction of total cattle slaughter in the US so far this year has amounted to about 40,000 head per week, or 6pc less versus one year ago. Poor packer margins, and the resulting slowing of slaughter plant chain speeds, was a primary reason for the reduction, he said.

An important result of this slowdown was sharply higher slaughter weights as cattle have backed up in US feedlots. Average dressed weights last week were 359.5kg, up 2.3pc from this time last year.
 

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