Processing

Weekly kill: Supply and demand show signs of closer equalibrium

Jon Condon, 02/07/2013

 

Equilibrium between cattle supply and demand appears to be drawing closer, with evidence of more positive adjustments to some direct consignment grid price offers, and a physical slaughter cattle market that is drawing closer in value to direct consignment rates, after months of being behind.

The trend is certainly not reflected in any slowdown in rates of kill yet, however, with the weekly eastern States slaughter report issued by NLRS yesterday showing another massive week, totalling 155,628 head.

Queensland’s kill last week was +1c, reaching 82,370 head, while southern states were generally around breakeven, or a little behind. NSW reported a total around 36,600 head; Victoria around 24,500; Tasmania 4700; while South Australia recorded the biggest fall, back 8pc to 7500. The three largest killing states were all still up between 10 and 25pc on kills seen this time last year, however.       

As indicate last week, a number of large export processors have signalled that they have now discontinued weekend and overtime work to cope with the huge flow of cattle experienced since March.  There appears to be very little, if any ‘unconventional’ weekend work scheduled across Eastern Australia for this Saturday, for example, which should start to be reflected in lighter kill numbers from this week or next week forward.

As discussed last week, the reasoning behind that is open to interpretation, but it could be driven either by current flat demand in international markets, the start of a slow-down in cattle supply, or both.

 

Supply-side showing easing trend

On the other side of the coin, supply is showing some distinct signs of easing. Processor forward bookings that were out several months in some plants are now much less congested.

One large processor said producers could now make a call today and get cattle killed virtually anywhere in Queensland, as soon as next week, in moderate consignment sizes.

While there are still plenty of feeder cattle evident in the market (Roma store sale will offer 10,000+ today), slaughter cattle are becoming harder to procure. That is in clear evidence also in southern regions, where slaughter grids this week have firmed again, in response to a drift in supply.

“People have been predicting a lightening in numbers in the south for a while, and it’s now started to happen. Those southern markets have got a real wriggle on this week, with cattle getting dearer – but that’s not uncommon for this time of year,” a regular southern processor contact said.

Southern grids are probably 10c/kg better than those in southern Queensland at present, with the trend starting last week.

“There’s still some big yardings about, but they’re more store cattle, and not a lot of export weight slaughter cattle included,” our contact said.

“It’s getting harder to find those killable cattle, both quality and quantity wise, in the yards, particularly in the south. Some of the yarding numbers look alright, but there’s a lot of little cattle among them,” he said.

“We’re still comfortable, supply wise, two or three weeks out, but there are slots starting to appear after that,” this processor said.

“There’s still plenty of cattle out front, but the urgency has gone out of job. They’ve got their space that they booked earlier, and now they’re just waiting to price them.”

One top of one large exporter’s 5c/kg upwards adjustment to Southeast and Central Queensland direct-consignment rates last week, another large multi-site competitor has lifted rates 5c/kg across most grassfed cattle this week.

That leaves the going rate for 0-2 tooth heavy grassfed steer around 320c/kg, four-tooth 310c, and best cow 270c/kg. EU grassfed steer is up 10c/kg to 350c, but the exception to the rise is MSA cattle, unchanged on 340c for grass steer.

As highlighted also in another of this morning’s articles “First producer gains Certified Pasturefed status”, another historic milestone was reached this week when Teys Australia's northern and southern region direct consignment cattle price grids included an additional 'column' for PCAS-certified cattle, offering an additional 20c/kg price premium above the existing MSA grassfed steer/heifer price from August 1.

MSA grass and grain prices have been remarkably stable for some time, with plenty of cattle placed on 70-day programs earlier, while MSA grassfed has also been plentiful – albeit at a considerable premium over normal grassfed rates.   

The impact of recent rain across a fair expanse of eastern Australia and a desire to simply ‘keep some momentum going’ in supply, is behind the recent price movements.

More producers are now taking a wait-and-see approach, and the urgency seen in earlier turnoff now less obvious.

“To use a popular quote, a falling market will always buy a lot more cattle than a rising market,” a processor said.

  • Readers should note a disclaimer over NLRS’s reported kill numbers: a number of substantial processors do not provide weekly statistics for the report. In Queensland, Nolan’s at Gympie does not supply figures, leading to a potential under-reporting of Queensland’s weekly kill by about 2000 head. In Victoria, the list is longer, including MC Herd, Wagstaff, Ralphs and others. In percentage terms, Victoria is likely to be the most ‘under-reported’ state, sources tell Beef Central. The main reason for non-reporting seems to be linked to a long-standing dispute with MLA’s NLRS over market reporting methodology. Despite the omissions, the underlying trends seen in kill numbers nationally, and state- to-state are still of considerable value in painting a picture of overall trends.
  • The Eastern Young Cattle Indicator closed yesterday at 319.75c/kg liveweight, up 0.5c on this time last week.

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