No, you’re not reading last week’s Eastern States weekly kill report: the slaughter tally for the seven days ended Friday has hit yet another all-time record, this time reaching 165,171 head.
That’s been driven again by massive, near-record processor throughput along the Eastern seaboard, from Central and North Queensland all the way into Victoria, where the drought impact continues to push south.
Queensland’s seven-day kill at 82,754 head was the highest seen since two weeks in May last year, when the state’s beef producers started jettisoning cattle in earnest as poor conditions started to set-in, and winter was on the horizon.
Last week’s Qld kill was 11pc above an already high week this time last year.
In NSW, last week’s tally pushed 1pc higher than the previous week to 39,397 head – exceeded in the record books only by a +40,000 head kill in mid-December, and a horror period of extreme drought kills back in 2006. Last week was 14pc above this time a year ago.
Female kill in both the largest processing states again pushed higher last week, shading 47pc in both Queensland and NSW.
The National Livestock Reporting Service also logged big numbers for Victoria, where the seven-day kill reached 29,629 head – exceeded in size only by a single week in December last year and a handful of kills in 2006. Victoria’s throughput was in fact +26pc on a year ago.
Only South Australia and Tasmania recorded kills more in keeping with historic records for this time of year. SA’s kill last week at 8693 head was 4pc below where it sat back in 2013, while Tassie at 4698 head, was just 3pc ahead.
The result graphically illustrates the plight that most of Eastern Australia is now in, season-wise, with most export and domestic abattoirs killing at their physical capacity to try to keep up with cattle supply. Weekend and double shifts can come at a cost penalty, but it is the only way processors can find to get on top of the cattle backlog.
All processors spoken to this morning said they remain under heavy supply pressure, despite some of the biggest early-season kills seen in history, since January. Many remain heavily booked well into March and April.
Cattle prices hold up much better than expected
Given the extreme circumstances outlined above, it can be argued that the slaughter cattle market so far this year is holding up way better than what some might have expected.
Let’s look at some southeast Queensland grid prices comparisons for this week, alongside the depths of the cattle market slump around August last year.
Current grid prices have been remarkably stable since most export processors got back to work in mid-January, despite the avalanche of cattle.
Back in August, Beef Central was reporting a four-tooth grassfed ox SEQ grid price around 290-295c/kg, dressed weight, and 255c/kg for better cows.
That same four-tooth steer today is worth 335c/kg, while the cow today is worth 305c.
That’s a 40-45c/kg better market for steer today, and a full 50c/kg better for the cow. In hip pocket terms, it means that good 260kg cow is worth $130 a head more to the producer supplying a SEQ export plant than what he would have got six months ago.
Why is it happening, given that East-coast processors, collectively, are arguably under more supply pressure now than they were back in August?
There’s a couple of reasons.
Obviously the currency value has helped. An A$ at somewhere between US88c and US90c, as it has been in the past few weeks weeks, is a big step from US96.5c where it sat as recently as October. That’s greatly improved Australian beef’s competitive position in international markets, and gives exporters some breathing space.
Strong, strong international demand is the other factor. Despite an all-time record export volume last year above 1.1 million tonnes, Australia has not suffered to any great degree through ‘over-supply.’
Nor has there been any great build-up of stocks occurring in cold storage, as has often happened in the past when production and overseas demand get out of equilibrium. Nor is there any real sign of product that would otherwise be exported being ‘dumped’ onto the domestic market, to be offloaded at giveaway prices.
Essentially, despite the volumes involved, we’re managing to find homes around the world for this extreme abundance of product, at reasonable prices.
“But processors are making a fortune!,” we hear some readers exclaiming.
Granted processor margins in the past six months have been as good as they have been in three or four years, but just watch what happens when it finally rains, and cattle supply again becomes inevitably tight.
Processors across the country are currently putting some fat aside for the cattle price war that will inevitably follow this drought, and the margin pendulum will again swing dramatically in the opposite direction, in Beef Central’s opinion.
It’s not that far back when export processors were routinely tearing up $100 on every grassfed ox they killed, and up to $200 on grainfeds. And it will happen again.
All eyes watching weather influence
Much will now depend on the extent, and volume of rain being foreshadowed out of the weather influence gradually heading east across NSW and Queensland over the next 4-5 days.
Another wave of sell decisions will inevitably reach trigger-point if this ‘last roll of the dice’ for many beleaguered producers does not deliver, in the form of significant moisture relief.
In many cases, grass-growing rain of 50-75mm or less will not be enough, as some runoff rain will be needed to put a bit of water back into empty dams, in order to encourage any sort of stock retention enthusiasm.
Unfortunately, we can expect to see another wave of cattle reductions from next week, if the weather does not deliver in key areas.
Grid prices remain unchanged
Typical public grid offers for SEQ slaughter this morning were around 330-340c/kg for 0-2 tooth heavy grassfed steer, 320-335c/kg for 4-tooth, and best cows anywhere from 285c-305c/kg. Lighter cows are obviously being priced more severely. In grainfeds, we found 100-day YG steer at 365c, and 70-day MSA steer at 350c, for boning groups 1-8.