The national weekly beef kill fell dramatically last week, declining more than 15 percent on average across the three eastern mainland States plus Tasmania and South Australia.

The tally for the week ended last Friday, June 17 was 119,750 head, down more than 21,000 head from a week earlier according to MLA’s NLRS processing report issued yesterday afternoon.

While Monday last week was a Queen’s Birthday holiday in most States, that only partly explains the decline, as some large export plants, including three of the four Teys factories, continued to kill on the public holiday.

Every state bar South Australia recorded kill percentage declines in double figures last week.
Worst-hit was NSW, where processing activity fell 22pc from the previous seven-day cycle to 28,710 head. Flood disruptions at sites like Nippon’s Wingham plant, which lost a couple of days’ kill, no doubt contributed to the poor NSW result.

Queensland’s weekly kill to Friday dropped 12pc to 65,489 head, while Victoria processed 15,309, down 16pc on the period seven days earlier (Victoria had a second Butcher’s Picnic holiday on Tuesday). Even Tasmania registered a 20pc decline, to 3459 head, while South Australia escaped the worst of the correction, back just 4pc to 6783 head. Western Australian figures are not recorded by the NLRS service.

Processor contacts say the decline is very-much market driven, with serious negative processor margins being reported, particularly in export cattle. That’s due to the combined effects of the high A$, and flat demand in Japan and the US. 

“More processors are deciding to take production capacity out, rather than incur such big losses,” one senior export processing stakeholder said yesterday.

Asked whether deliberate wind-backs of kills threatened to jeopardise committed supply contracts, he said he did not believe so. “Removing processing capacity can help lift the meat price, but there will be certain programs that processors will have keep going regardless, due to contract arrangements and long standing supply relationships.”

The processing contact said losses on grassfed Jap ox were close to $80 a head at present, but 100-day grainfed ox were ‘far worse.’ Shortfed Jap ox, being killed this week, based on a forward price back in March around 390c-400c, represented a head-spinning loss of around $200-$250 per head in today’s market.

A prolonged period of trading like that could put serious financial pressure on all export processors, but particularly smaller single-site operators where the businesses themselves could come under jeopardy.

Making matters worse is the extremely flat demand for beef within the Australian domestic market. Whether that is due to the general oversupply of beef on the domestic front out of diverted export kills, or from some degree of consumer backlash over recent live export events, it is impossible to say.

However anecdotal evidence from the domestic wholesale trade this week suggests that current demand is again ‘extremely weak.’ Contacts within Nippon’s wholesale division in Sydney said retail demand environment was "as bad as it has been for many years."

“If they could, most processors would currently prefer to sell their product on the domestic market to escape the currency factor. We saw it happen last year to an extent, but whenever it does occur, domestic prices tend to fall-away as volume increases. That has happened again this year, over the past four to six weeks,” a Nippon spokesman said.

Supply-side issues

Supply side, while there hasn’t been a lot of cattle in the southern Queensland marketplace in the past week, there are some big cattle movements happening out of the Northwest. Cattle Train access out of railheads like Julia Creek and Winton, in some cases, are booked-out four to five weeks ahead.

Some of these cattle involved are from across the NT border into the Barkly region, but are mostly made up of cows and heavy descriptions that were never in the frame as live export prospects.

In some cases, cattle consigned by rail through to Rockhampton will now be pushed south through to Brisbane region plants, because of the imbalance in livestock supply between the central/northern region and southern region of Queensland.

Teys Brothers livestock general manager Geoff Teys agreed with the assessment that cattle flow in the south was slow, which he partly explained by ‘people sitting on tractors.’

“A lot of mixed farming/grazing enterprises in the south appear to be taking advantage of the soil moisture, and are out planting wheat or barley at the moment,” he said.

“That’s impacted on cattle flow, for the time-being, concentrating instead on their cropping.”

Given the soil moisture profile across eastern Australia, Mr Teys predicted a ‘huge’ oats-finished cattle turnoff later in the year. There might be a few early oats cattle from mid-July, but the real run would start late July/early August, and would continue through to October/November.

That should provide a solid base for heavy cattle supply during the late winter/spring period out of southern Queensland and northern NSW, Queensland processors say.           

National Livestock Reporting Service manager, Travis Parcsi said last week brought to an end the early-season holiday short kill weeks, with no more multi-state public holiday disruptions now until early October. Further rain across southern states from Tuesday this week could potentially disrupt current week kills in some centres.

• The Eastern Young Cattle Indicator closed yesterday at 378.25c, down 4.25c on Friday, and the lowest point since the end of November last year. The heavy steer (Jap ox) indicator closed yesterday at 178.2c, down 2c on Friday.