Weekly kill eases amid growing concerns

Jon Condon, 05/07/2011


The national weekly beef kill eased last week from surprisingly high figures recorded for the previous seven-day cycle.

The NLRS slaughter report which monitors throughput across the three eastern mainland States plus Tasmania and South Australia, reported that numbers for the week ended Friday, July 1 reached 138,203 head, down 3 percent on the previous seven days.

Every State with the exception of NSW recorded declines. Queensland’s kill at 73,896 was down 2pc on the previous week, and negative 6pc on the same week last year. NSW recorded a soft 1pc rise to 36,540 head, while Victoria was down 9pc to 16,598. Tasmania’s kill fell a sizeable 21pc to 3477 head, while SA was down 4pc to 7692.

All indications would suggest this week’s kill will be down further, and rates of slaughter in coming weeks could take a substantial hit, judging by the current mood of processors and the state of supply/demand.

JBS Australia closed its doors for at least a fortnight at its Beef City grainfed plant near Toowoomba on Friday, due to the adverse trading conditions for grainfed beef in Japan. On current expectations, the Beef City killfloor is due to restart on July 15 and the boning room, on July 18. The closure will take 1100/day capacity out of the JBS system.

Another factor raised by JBS regarding the closure was increased AQIS fees. Despite a vigorous Government lobby by the processing industry and supported by Beef Central, from July 1 AQIS inspection fees and costs rose by the equivalent of $6-$8 a head (AQIS’s own estimate). The broader industry has already accepted that those costs will ultimately be borne by producers, in the form of lower livestock returns.

Also certain to impact on rates of kill in coming weeks will be annual ‘scheduled maintenance’ closures in southern abattoirs, during the traditional mid-winter period when supplies of killable cattle are short. Teys Naracoorte, for example, will close for three weeks from Thursday (refurbishment of the by-products area plus general maintenance), and plants like JBS Brooklyn will also take a break, sources say.

Other plants nationwide are also likely to skip days ‘as required’. Teys Brothers says its Beenleigh factory will probably stop the chain for a day this week, and one major multi-site processor said it might kill as few as three days at its plants next week.

The slaughter-ready cattle market reflects the current circumstances faced by export processors.

NLRS over the hooks figures for NSW compiled yesterday showed heavy grassfed four-tooth steers ranging from 286c to 315c, and averaging 300c. That’s back 6c on last week, and down a hefty 24c over the past 14 days. Equivalent Queensland figures will be compiled this morning.

Direct consignment quotes

Direct consignment quotes from one major export processor in southern Queensland on Monday were 305c/kg for four-tooth Jap ox, while cows 240kg dressed or better were 275c/kg. Another large multi-site processor was offering 300c/kg for four tooth grassfed ox and 305c for milk-tooth, with cows over 300kg at 285c.

Similarly, there has been a 30-40c decline in grainfed ox values over the past four weeks, from 365c in early June to 320-330c/kg today.

One notable aspect at present is the narrow split between Japanese steer and cow prices, currently as little as 15c/kg. The reason is that the chilled quality end of the market is suffering the greatest pain, while manufacturing and lower grades are not quite so badly affected.

“It’s the higher-priced, higher quality loin cuts that we can’t sell,” one large processor contact said.

“We just can’t sell meat at present and have run into a brick wall. If producers don’t want to meet the market at current levels, then we don’t kill cattle. I think we will see huge drops in the kill in another week to fortnight’s time,” a reliable Beef Central contact said.

“There’s a huge backlog of meat in the system at present that has to be cleared. Some of it (chilled) is now running out of shelf-life, or alternatively is being frozen-down and put into cold storage, which itself devalues the product. Processors are deciding to take production capacity out, rather than incur such big losses.”

The Eastern Young Cattle Indicator closed yesterday at 377.5c, up 3.75c from a week earlier.


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