Southern states beef kills took a predictable hit last week as wet weather and moderate to extreme localised flooding constricted access to slaughter stock for processors in many areas.

The reduction in numbers was not as severe as earlier feared, however, mostly because they came on top of large declines a week earlier.

Queensland, in contrast, moved in the opposite direction, lifting its kill by 3800 on the week previous. This largely offset the drops in processing activity seen in the south, delivering an Eastern States tally for the week ended Friday of 127,828, about 800 up on the week before.

The Queensland kill of 71,689 was up 6pc from a week earlier, as earlier rain disruptions lifted and all major plants had a clearer run at slaughter stock, with the exception of some rail line issues. The numbers also reflected the full return to work last week of Nippon’s Mackay factory.

Some processing sector observers were surprised at how mild the decline was in NSW, given the seriousness and extent of last week’s flooding. NSW numbers declined only 4pc, to 27,375 head, but this came on top of a further 8pc decline the week previous. It also reflected the fact that cattle movements were less affected early in the week, before floods hit, which is the busiest period of the weekly cycle for transport.

Cattle supplies at NSW physical markets reported by NLRS dropped 23pc last week, as southern regions experienced heavy rain and widespread flooding. Several sales including Wagga were cancelled, while others, like Forbes, penned only 100 head. Markets that managed to proceed in the State’s Central West were also limited due to the rain, while yardings in the Northern Tablelands reported as ‘adequate’ given the wet weather.

Victoria’s kill was the worst affected last week, dropping 7pc to 17,616, while South Australia logged 7070 head, down 4pc, and Tasmania 4078, down 2pc.

Victoria’s kill for the current week will be further affected by Monday’s Labour Day public holiday, and there are some more short weeks ahead with back-to-back four-day kills due to Easter in early April.

Processing sources contacted by Beef Central yesterday all agreed that kills in NSW will still be down this week due to lost days caused by post flood disruptions, and might take several weeks to recover. One source suggested a drop of 20pc was on the cards.

Grid prices steady  

Direct-to works grid prices ex Southeast Queensland have remained steady this week to 5c/kg higher in places, reflecting the rain-driven supply challenges being faced by processors rather than any significant shift in market sentiment. Four-tooth grassfed Jap ox rose to 345c/kg, and 0-2 teeth 350c in places last Wednesday, while cows were steady.

Any rises around mid-week appeared to be more on a spot basis for short periods, designed to shore-up positions.

Another trend apparent in national grid price values currently is that the seasonal supply gap has again closed between northern and southern Australia. Whereas the south was as much as 10-15c cheaper in grids a month or two ago, as the southern cattle supply was in full swing, there is now little gap between regions, from Victoria to southern Queensland. At some time over the next two months, the pendulum will swing the other way, with the abundance of cattle in northern areas pushing relative grid prices below southern areas where killable cattle will become scarcer. 

The recent mild decline in currency value, down to the low US105s yesterday, after earlier surging past US108c again, will be giving export processors the first glimmer of hope that some relief may be at hand in terms of international competitiveness. There has now been an encouraging 300-point downwards movement in a two-week window since February 28.

Most say it needs to reach parity before there is any appreciable advantage handed back to Australia, which may still be some way off.

The best that can be said about currency at the moment is that it has shedded-off much of the extreme volatility seen late last year, when surges or falls of 200 points (2c) were happening on an almost daily basis. While high currency value will still impact on exports, at least if it is more stable, exporters can better manage their way around the problem.

Market outlook

While the Japanese market remains particularly weak, Korea is showing some signs of trading volume again. In fact it appears that Australia has exported more beef to Korea for the first two weeks of March than has the US.

The most likely reason? Importers are delaying customs clearance on US product to take advantage of the 2.6pc tariff relief on US beef products imported after March 15, negotiated as part of the KORUS Korean – US Free Trade Agreement. There is a big warning signal flashing in this development for Australia, which will remain at a 2.6pc price disadvantage against US competitors this year, until Australia can complete its own FTA with Korean authorities.

In the US market, contacts reported yesterday that Eldon Roth’s Beef Products Inc has wound-back production of its Lean Finely Textured Beef product following sustained attacks from celebrity chef Jamie Oliver and others (see Beef Central  Monday story, "March exports to US continue rapid pace”) over the processes used to produce it.

Given that LFTB is a direct substitute for lean imported trim used in burger pattie manufacture, its absence in the marketplace could have a significant demand impact on Australian grinding meat prices, particularly at the lean end. LFTB is understood to generate more than 100,000 tonnes of material each year, traditionally used by major food service outlets like McDonalds.

The US cow beef market continued to rise into uncharted territory last week, with prices of both imported and domestic lean processing beef increasing. The US imported 90CL indicator increased US0.5¢ on the previous week, averaging US211¢/lb (equivalent to A 412.2¢/kg). US domestic 90CL beef prices also edged up US0.5¢ last week to 220.3¢/lb.

Imported beef prices continued to climb last week in the US, particularly on the lean side of the grinding beef complex, analysts reported on Friday.