Weekly kill: Easing trend continues in grids, as rampant A$ bites hard

Jon Condon, 25/07/2017

THERE’S been a general easing trend in northern and some southern slaughter cattle price grids again this week, as the full impact of the recent surge in the value of the Aussie dollar takes effect.

While some Queensland and NSW processors’ offers have not changed over the past seven days, others have fallen 10-15c – partly to better align offers between competitors after the recent flurry of downwards adjustments.

Beef Central has focussed on the significant impact that the recent sharp rise in the value of the A$ has had on export market competiveness in this earlier article. From sitting comfortably in the US75s only three weeks ago, the currency this morning sits at US79.2c, a rise of 4pc in a very short period.

Processor grid offers are a bit of a moving feast at present, with some big gaps of 10-15c between competitive offers evident today, as this report is compiled. That big gap is not likely to last long, however.

Best Queensland grid offers seen this morning ranged from 500-515c/kg on the benchmark four-tooth grassfed ox, and cows 440-450c. A large northern NSW export processor has offers for kills week commencing 14 August of 500c on the four-tooth bullock, and 445c on heavy cows.

Currency movement, combined with the tough underlying international meat market is seeing margins plunge into the deep-red again for many processors, despite the recent easing trend in procurement cost. ‘Horrendous’ was the word used to describe the market conditions this week by one export meat sales desk.

Short plant closures looking more likely

The outlook for slaughter cattle supply over the next six to eight weeks continues to look bleak for beef processors, and at least three large NSW/QLD processing entities spoken to this morning confirmed that they are entertaining the idea of closing down (at some sites, at least) for a week or two during the depths of the cycle to try to manage the situation. The bean-counters are running the numbers at present to weigh-up the impact, as there are implications either way. Weather will have a bearing on that decision.

Week (or longer) closures have been a feature during the past 18 months of short cattle supply after earlier drought impact. Last year, JBS closed for a week at its two dedicated grainfed plants, and other sheds closed for various periods.

Most of Australia’s significant beef processing sites have operated at reduced daily throughput, single daily shifts instead of two, or reduced days-per week for much of the past 12 months, due to supply constraints, but week-long closures are the logical next step in the process.

One processor confirmed to Beef Central this morning that it will definitely skip a week (at this stage, that’s all) during early September. More details about that closer to the date.

This week’s Eastern states beef kill is back two percent on the week before, at 133,667 head. All states bar Victoria were in negative territory. Queensland’s kill was back 1pc to just below 70,000 head, while NSW fell 2pc to almost 32,000 head. South Australia dropped 17pc, accounting for around 6500 head, while Tasmania processed 4600 for the week. Victoria, the outlier, rose by 1pc, delivering a weekly tally of 20,742 head.

Processors feel there are still a few fat cattle to come through late July, including some oats-finished steers, but early-mid August is forecast to see the real tightness set in.

The week of the Brisbane show (this year commencing August 10) is notoriously a tight supply week for processors in Queensland and northern NSW, and this year looks like being worse than normal, processors say, as producers hang up the drafting canes for a few days’ break. Post-Ekka time looks not much better, though.




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