Weather disruptions unlikely to stimulate sustained price lift

Jon Condon, 31/01/2012


The contrast could hardly be more different.

Unlike periods early last year when processors were throwing big money at producers to encourage them to get cattle to abattoirs ‘through hell or high water’, there is little likelihood of a repeat of that in 2012.     

Any modest improvement in saleyard or direct consignment slaughter cattle prices due to current rain-driven supply shortages this week is likely to be only shallow, and short-lived, given the sustained pressure being faced in international markets by processors.

There might be a few isolated sales where there is a modest lift in price to get processors over a supply hump, but it’s hard to see that becoming a more sustained trend. The only qualifier to that would be if it continues to rain solidly for the next month.  

While the big downwards adjustments in grid prices seen a fortnight ago have stabilised over the past seven days, if anything, trading conditions for exporters have got worse. The A$ has continued to climb towards extreme highs seen in 2011, pushing well above US106c yesterday.

Demand out of North Asia and Russia remains particularly subdued, with a little trading strength in the grinding meat market one of the few bright spots on the horizon. One key contact described the current state of export market demand as “woeful.” 

Unless processing sums improve, voluntary plant closures, either skipping days, or even week blocks (as Beef City did last year) are on the cards before mid-year, and could be sooner than many might expect.     

Grid quotes yesterday illustrated the less than enthusiastic cattle buying mood, mostly back 20c/kg to 25c/kg dressed weight compared with mid-January rates.

Southeast Queensland grids yesterday were typically 345c for best 0-2 tooth grassfed ox; 340c for 4-tooth; MSA steer 360c; EU steer 360c; and best cow 320c-330c.

The Australia Day public last Thursday took the edge off further momentum in processing numbers in the 2012 processing season, with the Eastern states kill tally for the week ended Friday, January 27 declining five percent to 112,068 head.

Most Queensland processors contacted by Beef Central yesterday indicated that rain-forced closures would happen this week, or were on the cards.

Near-record 24-hour and 48-hour rainfall in some districts as far west as Quilpie has created major logistical headaches for processors in Central and Southern Queensland. In some cases, particularly in Central regions, slaughter cattle this week have been able to depart the property of origin, but have been turned-back by flooding on arterial roads.

Nippon Meat Packers’ Oakey plant plans to close for a day on Friday, with enough cattle on hand or accessible for the first four days this week. The company’s Mackay plant closed on Friday, for a scheduled three-week lay-off.

Teys Australia has dark days scheduled at Lakes Creek in Rockhampton yesterday and today, while Biloela is also closed today. Kills at Beenleigh at this stage are on, but are a day-to-day proposition, depending on weather. Southern plants at Tamworth, Wagga and Naracoorte are full-bore this week.

JBS Australia managed to secure a kill for its Queensland factories yesterday, but was unsure about numbers for Dinmore today. Northern sheds (Rockhampton and Townsville) have not scheduled stoppages as yet, but much will depend on the development of the second monsoonal low forming in the state’s northwest yesterday, forecast to plot a similar path as the last event.

Major saleyards cancellations (Roma sale was cancelled today, and Emerald for Thursday already) could contribute to those processor decisions. A lot of cattle booked earlier have also been put back on the kill roster, either for late this week or next.

One positive conceded by processor contacts out of current events is that beef stocks on hand are starting to decline, with the holiday-shortened week last week and rain disruptions in the current seven-day cycle. But even with meat stocks in decline, nobody is in any hurry to replenish them again, feedback from export processors suggested.

At this rate, full Eastern States weekly kills closer to 150,000 head still look some considerable way off.

On a state-to-state basis, Queensland’s kill last week (w/e Friday, Jan 27) reached 55,037 head (+7pc on a week earlier); NSW, 27,970 (-16pc); Victoria, 17,677 (-18pc); South Australia 7962 (-8pc); and Tasmania 3422 (-17pc). Most of the slides in southern states were directly attributable to the Australia Day holiday.    

Weatherwise, one of the surprising points, despite all the publicity about the recent rain episodes, is that there are still large patches of country in Queensland and the NT that have missed out. Country around Winton and Corfield has had little rain, as has the southern regions of the Barkly Tableland.

One property near McKinlay had registered 130mm on its western boundary this week, and only 30mm on country to the southeast. The good thing is it’s still early yet, and there could well be more to come.

  • The NLRS Eastern States Young Cattle Indicator closed yesterday at 393c/kg, up 3.25con Friday but down 4c on a week earlier. The heavy steer indicator (178.2c) is down 7c on a week ago, while medium cows (139.6c) are back 7c.   




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