The Queen’s Birthday Monday holiday last week has put a dent in the Eastern States beef kill for the seven days ended Friday, but nowhere near as much as expected.
Simple logic would have suggested a skipped day at most Australian beef plants last Monday should have translated into a one-fifth decline in processing throughput for the week, but the National Livestock Reporting Service weekly report shows the decline was only around 9 percent.
All states, with the exception of Tasmania, killed more cattle than what some might have expected. Some plants appear to have thrown more staffing resources into the four active days last week, to compensate.
Still in all, the eastern states weekly kill tally of 136,281 head was easily the lightest since the Anzac Day short week at the end of April.
Queensland’s kill eased 8 percent to 71,460 head, while NSW declined only 6pc to 33,776 head. Further south, Victoria was back 10pc to 19,712 head; South Australia eased 13pc to 7454 and Tasmania took the largest hit, easing 19pc to 3879 head. Even with the lighter holiday week kills, most states were still 3-4pc above rates of kill seen this time last year.
Despite some further encouraging rain across large parts of Victoria, NSW and into southern Queensland, processors reported only very limited rain disruptions to processing for the week.
Flatness in international markets
On the meat sales front, exporters last week reported particularly flat conditions and subdued inquiry in all export destinations.
A prominent non-packer exporter said conditions were tough, as most world markets were pretty well full with product at the moment.
“There’s really nowhere that’s saying, yes, send us some more meat,” the exporter said. “It’s very quiet.”
Because of the volumes coming out of Australia, importers had tended to simply look at the A$ performance and deduct any softening in currency value off their offers.
“Where there’s a situation, as we have had, where the Aussie is weakening, to return to equivalent Aussie FOB price, we can actually offer at lower CIF price (cost of goods + shipping + insurance to the point of destination),” our exporter contact said.
“The effect of that on buyers is that something they bought at a dollar a kilo a month ago, Australia can now offer them at 96c/kg, and still produce the same net return. Customers are seeing theoretically cheaper prices offered out of Australia, along with very substantial quantities of beef.”
“That does not directly impact on the processor/exporter, in so far as he can still get the same net return. But a problem arises if and when the importer thinks there is even cheaper meat coming because of the currency trend, and a lot of it,” our exporter contact said.
“In that situation, they will tend to take a wait-and-see attitude, and that’s what’s happening right now,” he said.
In contrast, the reverse is applying in lamb export markets at present. Rain through Victoria and NSW has produced a much bigger relative decline in lamb production than in beef, and processors are asking substantially more money for their product in the international market now, as a result of that reduced supply.
Time would be the best solution to sorting out the current buying reluctance on international markets for beef, as stock on hand declines, our contact said.
“The mainstream markets like North America, Japan and Korea, and even China are all very flat, but they will still have to buy meat soon,” he said.
Illustrating the recent trend, the US 90CL imported grinding meat price slipped about 5c/kg in Australian currency terms last week, returning to recent lows around A383c/kg, despite the softer trend in the A$.
“Most exporters were in a forward-sold position earlier, but last week and heading into this week, they are now finishing-off those orders and are looking to make good forward sales on meat, knowing they have cattle secured forward on price heading well into July and August,” our contact said.
“But just at the moment, that’s a bit hard to do, given the general sluggishness in the market,” he said.
Cold snap could trigger turnoff
A cold snap across many parts of Eastern Australia in the past week, turning around what had been a very mild start to winter in many areas, could push more slaughter cattle to market in the next four to six weeks, a large southern Queensland processor said yesterday.
The very mild start to winter and absence of heavy frosts up to now had left a lot of country in better shape than it would otherwise be in, but a week of heavy frosts in many prone areas could now push cattle forward, particularly from those supply areas that enjoyed the better of the season. Such a weather shift inevitably sparks a rapid turnoff of cattle, as feed declines, the processor said.
Major southeast Queensland processor grids monitored by Beef Central showed no movement last week, as big supply continues to meet modest demand.
Grids are yet to show any impact from the recent softening trend in the A$. Processors said the A$ would have to remain lower for some weeks yet, before it started to become a factor in livestock pricing, as older product moves through the system.
Major processor grids in southeast Queensland yesterday saw quotes for four-tooth grassfed ox 285-290c/kg, milk and two-tooth steers 295-300c, and best cow 235-250c/kg.
GF MSA under pressure
MSA cattle prices currently may be under some pressure, however, as the normal winter lull in consumer demand for grilling cuts takes greater effect, combined with a heavy flow of grainfed heifers and steers exiting feedlots now after earlier placement due to dry conditions.
That’s happening both in southern Queensland, and well into NSW, processors say. Currently grainfed MSA steer price on processor grids is around 340-345c/kg, but could come under some pressure, judging by recent wholesale trends.
A strong indicator of that is the point that some MSA plants are now packing only boning groups 1-8, instead of groups 1-10, because of the abundance of MSA cattle available, relative to current demand.
This strategy has attraction to processors during flat demand periods: it not only improves the overall quality in the box, but saves money on reduced aging periods required for lower boning groups. Inventory stock held in cold storage costs money.
Those boning group 9-10 steers and heifers are currently defaulting back into non-MSA grainfed yearling, at a penalty of at least 10-15c/kg, in some cases.
At this stage, given recent feedlot placements, it looks like there will be plenty of GF MSA cattle supply over winter, processors say, and demand for grilling cuts will not really start to kick-away until warmer weather around September.
- The Eastern Young Cattle Indicator closed yesterday at 308.75c/kg liveweight, up 4.5c on a week ago, and 25c/kg better than this time last month.
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