HAVE we already seen the peak of the 2016 Australian Eastern States cattle slaughter cycle?
The question is being asked, as the five-states weekly kill last week snuck past 150,000 head for the first time this year.
The tally for the week ended Friday recorded by the National Livestock Reporting Service, at 151,363 head, is not far off 30,000 head below the high-point achieved during last year’s drought-fuelled cattle turnoff.
It could be that last week was at, or very close to, the high-water mark for beef kills for 2016, some contacts are now suggesting.
“Everybody (processors) from here on is going to struggle for numbers,” a trusted processor contact said this morning. “We may have rung the bell for the year, numbers-wise.”
Earlier there was wide support for the theory that this year’s Eastern states kill would be roughly 30,000 less than for the same period last year. If we apply that measure to this week’s kill, the figure is negative 26,000 head, not that far off.
As evidenced in recent grid movements, supply is again starting to come into play in the slaughter cattle market, with Queensland direct consignment grid prices rising another 5-10c/kg this week. That comes on top of last week’s first, significant upwards movement in grid prices seen since early this year.
Competitive grids seen this morning for southern Queensland kills between now and the end of May show four-tooth grassfed PR steer at 495-500c/kg carcase weight – up 5-10c depending on which grid is in front of you. Cow grid offers this week are around 450-455c, up by a similar amount.
Most Queensland plants kill rosters remain fairly current, with reasonable coverage out for the next 10-14 days, but thin after that.
Individual consignment numbers out of Queensland’s heartland cattle country are also showing signs of slipping, feedback suggests. “Instead of a vendor showing up with an extra deck, there are consigning with a deck less than expected,” a processor contact said.
Grainfed numbers are continuing to hold up reasonably well, although there are not a lot of spot grainfed cattle on the market – most being program business.
Dollar, supply having influence
Two factors are driving grid adjustments this week. The Australian dollar, encouragingly, continues to drift a little lower, after stubbornly pushing into the US76-78c range earlier. It reached US72.64c yesterday, its lowest point since the end of February, providing some much needed relief in export competitiveness. Some of that, at last, has been eaten up by the softness in the export meat market, however.
The second is tighter cattle supply, which looks like being the underlying story for the remainder of this year.
While the last two Queensland grid price corrections have been positive, it’s hard to see a lot of upside on pricing from here, while ever export meat markets remain as flat as they are. Processors are more likely to drop shifts, rather than further chase cattle, through pricing, on animals that already represent a loss proposition to processors.
What’s perhaps disturbing is that cattle price and meat price signals are again drifting out of alignment. While at the bottom of the recent cattle price cycle processor profitability on some (not all) lines were approaching breakeven, that gap again appears to be widening. Most lines are now $30-$50 worse off on profit (or more accurately, loss) than where they were three weeks ago, Beef Central understands.
We’d expect to see some impacts on kill rosters in some Queensland plants in coming weeks – either skipped days, reduced daily throughput, or both.
Some southern processors have also now started dropping shifts, as the supply lines are stretched.
Southern processors are struggling to find numbers through saleyards and direct consignment this week on the back of last week’s rain. Plants like Wagga will only kill four days this week, Beef Central understands, and other plants like Australian Meat Group have recently taken a wedge of time off. At least two other Victorian sheds were working 2-3 days prior to the recent surge in dairy cow numbers. Southern grids remain 20-30c above the offers in southern Queensland, which while perhaps a little earlier than normal, is not atypical for this time of year.
Queensland’s kill last week lifted 14pc on the week before, reaching 76,456 head – still 13pc behind this time last year.
The NSW kill reached 35,840 head, up 4pc on the week previous, while Victoria’s kill fell sharply, by 12pc to 26,544 head, after a big spike the previous week driven in part by dairy cow liquidation.
The SA kill last week also fell 4pc, to 7810 head, while Tasmania recorded a tally of 4713 head, +13pc on the previous week.
Tomorrow: What impact is Victoria’s dairy cow sell-off likely to have on the market?