Weekly kill: Grids soften as export meat prices ease and seasonal closures loom

Jon Condon, 03/12/2019

DIRECT consignment slaughter price signals are becoming harder to distinguish, as more processors withdraw from making offers this week, confident that they have most of their kill requirements covered through to seasonal closures due in a fortnight’s time.

Among those southern and central Queensland processors still offering over the hooks quotes this week, grids have slipped another 10c/kg, with best offers seen this morning of 580c/kg on four-tooth grassfed heavy steers and 480c/kg on heavy cows. That’s for HGP-free cattle, with implanted animals 10c/kg less.

As well as supply pressures, one clear reason for this price adjustment is a big check in export meat prices seen in the market this week. After a series of spectacular rises since October, the benchmark 90CL imported grinding beef indicator into the US eased  4c/kg in the most recent (if already somewhat dated) indicator posted on 28 November. But trade sources say that export prices have in fact dropped away much more dramatically since then, and look to be under further pressure.

The majority of larger Queensland processors have no quotes active this week, being content to top-up their remaining limited requirements for the 2019 season out of the saleyards system. A larger yarding of 1800 head at Gunnedah this morning saw most cow prices weaken, with the exception of heavy cows which were firmer. Cows were also easier in a larger yarding at Naracoorte today.

Further south, competitive quotes in NSW and South Australia have heavy steers at 545c/kg and best cows 460c.

Price distinctions on HGP status

Apart from how well slaughter cattle prices have held up this year in the face of relentless drought and high turnoff numbers, one of the defining features in slaughter cattle pricing this year has been greater evidence of price distinctions between HGP-treated and untreated cattle.

At least two large export processors in southern states have discontinued HGP-treated slaughter altogether this year, in a move which also greatly simplifies and streamlines the management of product through their plants.

With the exception of JBS Australia, which offers no price distinction on HGP use, most other eastern Australian beef processors now have premiums/discounts (depending on whether you are a pessimist or optimist) on implant use on grassfed cattle. One large multi-site, multi-state processor recently started publishing separate grid sheets for cattle with, and without the pill.

For most grassfed lines, the distinction remains 10c/kg, but is as high as 20c/kg in some examples, especially for cows, and as low as 5c/kg in others. Grainfeds range up to 40-50c price differential.

This time last year, HGP-driven price signals where nowhere near as clear, or as well-defined as they are in the industry today. And there is one, overwhelmingly large reason: China.

Being a non-HGP market, the sheer growth in beef trade into China being experienced this year is heavily influencing Australian processor pricing decisions, and that is unlikely to change any time soon. In fact Beef Central understands it’s likely that one large processor will start the 2020 season off with significantly larger premiums/discounts for grassfed cattle, depending on implant status.

Brazil growth into China

One of the suite of reasons why Brazil has made such massive inroads into the China market this year is HGP status, together with the fact that Brazil has gained a huge advance in the number of its beef plants eligible to export to China.

Brazil’s cattle and beef prices exploded in October and November (+40pc) as the country’s exports to China and Hong Kong hit all-time record highs.

Chinese buyers chasing supplies to cover needs for the Chinese New Year and beyond have produced dramatic rises in exports out of Brazil. Exports of fresh/frozen beef in October were 160,099 tonnes, 18pc higher than a year ago. Within this, exports to China in October were 65,827t, 112pc higher than the same period last year.

So far this year, China has accounted for a little over a quarter of Brazilian beef exports (26pc).  In October, however, exports to China accounted for more than 40pc of all Brazilian beef shipments. When Hong Kong is included, the figure rises to more than half.

But as Chinese buyers aggressively chased supply across the globe in October and November, they are facing significant competition from domestic channels.  In Brazil, domestic beef demand tends to increase at the end of the year as consumers take advantage of 13th month salaries to organise traditional BBQ parties.

According to Brazilian sources, cattle prices a couple of weeks ago were up about 40pc compared to early October levels.

Beef kills continue at extreme high levels

Eastern States beef kills showed no sign of end-of-season slowdown last week, with a five-state throughput figure of 156,537 head for the seven days ended Friday. While that was down 1pc from the extreme highs seen a week before (the third largest kill all year), it was still 16 percent above rates of slaughter seen this time last year.

Queensland accounted for 79,900 head last week, up by 26pc year on year as drought cattle numbers continue to push through the system, while NSW at 43,083 was still 4pc higher than last year.

Victorian numbers lifted 6pc on the previous week to 30,705 head (+15pc year-on-year); South Australia was up 18pc to 4771 head; and Tasmania was unchanged on 5131 head.


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