Processing

Weekly kill: Some Qld processor grids slide another 10c, as supply surge grows

Jon Condon, 04/06/2024

WITH a dry track in many areas and cold conditions starting to impact pasture condition, slaughter cattle supply continues to grow as the processing industry approaches its 2024 season mid-point.

Last week (ended Friday 31 May) produced another season-high seven-day national adult cattle slaughter tally of 142,162 head. That’s the fourth consecutive week (public holiday impacts excluded) where new season highs have been set.

Last week’s number was up another 2900 on the previous season-record set a week earlier, and more than 18,000 head higher than the same week last year.

Extra Saturday shifts and small incremental gains in in-shift production as a few more staff are accrued explains much of the recent advance in throughput, but it’s widely interpreted that a natural threshold due to staffing shortage has now been reached.

The healthy volumes being processed during May was reflected in monthly export data being released later today or tomorrow, showing May monthly beef exports at their highest level since December 2019 (separate report to come).

A rise in southern states saleyards prices this week (details below) has re-activated interest from Victorian and southern NSW processors to buy more cattle out of Queensland. As an illustration of that, yesterday’s Tamworth sale saw good cows making the equivalent of 500c/kg carcase weight and heavy steers 600c, whereas this week’s smaller Warwick (southern Qld) sale saw similar cows around 450c/kg and Gympie yesterday 435c.

JBS highlights US production and price challenges

Part of the momentum behind the current surge in exports was discussed by global meat processor JBS during its recent first quarter ‘fireside chat’ with analysts.

In what is a ‘traditionally weaker’ March quarter for the global protein industry, JBS’s beef business in Brazil and Australia captured cattle cycle highs in both countries, while the company’s North American Beef division continued to experience weak margins due to the local cattle cycle and seasonal conditions, global CEO Gilberto Tomazoni said.

JBS Beef North America’s first quarter profitability was under pressure considering the more challenging cattle cycle given that the price of US live cattle increased more than wholesale price, he said.

In contrast, JBS Australia’s first quarter growth in revenue year-on-year was the result of higher volume sold in both domestic and international markets, Mr Tomazoni said.

“The growth in profitability in the annual comparison mainly reflected the greater availability of cattle in the Australian market, given the more favourable cattle cycle and efficiency gains in several areas of our business in Australia,” he said.

An analyst asked for more information about the current dynamics in US Beef, and where US heifer retention was up to.

JBS US beef division head Wesley Batista said compared with last year, 2024 was going to be a more challenging year for US beef.

“It’s simple: it’s a lower availability of cattle, and on the demand side, obviously, the US consumer with overall inflation in many other categories making it more difficult for the consumer to have a higher demand for beef. And on the export markets, it’s not very dramatic, but we obviously have our Australian and Brazilian businesses doing very well in volumes and exporting. Obviously that creates competition for (higher priced) US beef in the export marketplace.

“So for sure, it’s a tougher challenge, a tougher market than last year for US beef,” Mr Batista said.

“When it comes to heifer retention, we haven’t yet seen very clear or definite data that indicates that US heifer retention has significantly started. But we see initial signs, and we look at it with optimism. One of them is that relatively speaking, it’s a better year for US beef in terms of seasonal conditions compared to last year. It’s not perfect everywhere, but overall it’s better than last year.”

“And the other point is the reduction we’re seeing in US cattle processed, year-on-year. When you qualify that data a little bit, we’re seeing a 13pc drop in US cow kill – it’s still not as low as it should be to have a clear indication of heifer retention, but it’s a 13pc decrease, which is not irrelevant.”

“I’m not saying that those are definite signs that the US is well underway in heifer retention, but we look at those signs with optimism,” Mr Batista said.

Cattle start to flow, pushing some slaughter grids lower

A few rain disruptions excepted, slaughter cattle flows are now growing, week-on-week.

That – together with some softening in international grinding beef markets – is contributing to further price corrections in some Queensland processor grids this week. Imported lean grinding beef into the US has fallen 63c/kg or 7pc over the past five weeks, from an all-time record high of 970c/kg seen back on April 19.

Southern Queensland direct consignment cattle grids seen this morning show some operators have lowered their price offers on both grass export steers and slaughter cows, with the standard four-tooth heavy steer anywhere from 500-520c/kg, and heavy cows 440c/kg.

Central Queensland rates have also drifted lower, now mostly 20c behind southern parts of the state, with quotes seen this morning around 490-500c on four-tooth ox and 420c/kg on better cows.

It’s becoming apparent that the ‘traditional’ 10c/kg price difference between processors in southern parts of Queensland, and the three Central Queensland plants may be coming under pressure, due to rising transport costs. The difference in price has always been attributed to the freight cost of getting CQ cattle back to the larger concentration of southern Queensland plants for processing, which is common. It may be that 15-20c/kg becomes a more common spread between the two regions, to account for the transport cost difference, Beef Central was told. We may look at this in more detail in a later story.

North Queensland rates are now 30c/kg behind the bottom part of the state.

Further south, we’ve seen slaughter grids in southern NSW this morning offering 570c/kg on four-tooth ox, having risen 10c a fortnight ago, with cows unchanged on 480c. Eastern regions of South Australia are unchanged with offers of 550c on ox and 520c on cows. Lack of rain in the region is a factor.

Tax implications sometimes have a bearing on slaughter cattle supply as the end of financial year approaches, with some vendors electing to hold cattle back during late June to show in the new financial year. It’s a little early to detect that this year, but most processors did not appear to be concerned about the prospect of a short week or two.

Southern saleyards showing price rises

There’s been a general rising trend in saleyards prices in southern states early this week, after some substantial falls a week earlier, partly driven by quality.

Wodonga sale this morning yarded 1600 head, with a much stronger cow market (+30-40c/kg in places) a feature. Heavy steers sold 15c dearer to average 325c/kg, while bullocks sold to a smaller group of buyers with prices softening due to quality and age. The bulk ranged in price from 285c to 332c/kg. Cows were the high point of the sale with prices gaining momentum as the sale progressed. Heavy cows last week topped at 235c and this week peaked at 287c/kg. The bulk of the better finished types sold from 254c to 287c/kg.

Further west, Naracoorte sale this morning yarded only 698 head, with few adult cattle included. Quality was mixed with the ongoing cold and dry conditions a factor. The market was firm to dearer over most categories, with cows 15c/kg stronger, with heavy 3 and 4 score cows from 235-272c.

Yesterday’s Wagga sale yarded 4470 head, down 15pc on the previous week, due mostly to rain. In the heavy export sale steers + 600kg saw prices improve 3c with the bulk selling from 260c to 333c/kg. Heavy grown steers suitable for processors gained 20c, selling from 255c to 348c/kg. Heavy cow prices continued to climb as the sale progressed due to the shortage of well finished types at all selling centres. The middle run of leaner types under 530kg sold from 192c to 232c/kg.

Gunnedah sale this morning yarded a rain-reduced 1000 head, back by one third on last week. Cows were up by 25-40c/kg. Lighter cow categories sold from 134-227c/kg and medium weights to 235.2c/kg. Heavy four score cows were up to 40c/kg dearer selling from 239-265c.

Roma store sale this morning gathered 4725 head, down about 3000 on the previous week. Rain further west around Quilpie and Thargomindah was a factor. The sale was still in progress when this report was filed (full report tomorrow), but steers 500-600kg made 276c, with +600kg descriptions 250c/kg.

 

 

 

 

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