4. Australian cattle industry projections - cattle slaughter and beef production
A feature of the Australian cattle markets in recent years has been the consistently tight supply of slaughter ready cattle. While the reasons for this tight supply have been different between 2009, 2010 and 2011, the overall impact is very much the same. For 2012, the available supply of cattle will again be dictated by seasonal conditions, albeit with the prospect for numbers to increase significantly if conditions deteriorate quickly.
For 2012, Australian adult cattle slaughter is forecast to total 7.55 million head - an increase of 3.1% on the estimated 7.325 million head in 2011. While this would be the highest adult slaughter number for the past three years, it is still well below 2007 and 2008 volumes, when drought conditions forced additional stock onto the market.
Based upon the assumption of seasonal conditions remaining positive for 2012 and producers sustaining rebuilding efforts, the 3.1% increase in throughput will be largely acquired by an increase in heavier cattle entering the market. As experienced in the previous two very wet years, rebuilding efforts will constrain female cattle throughput, while producers will be keen to make the most of the better feed conditions and finish young cattle through to heavier weights.
As mentioned above, adult cattle throughput has been constrained for the past three years, but due to different reasons. In 2009, the drought across eastern Australia was at its worst, with the lack of water and pasture fuelling turnoff rates, but low branding rates in previous drought years (2007 and 2008) had shrunk the available pool of slaughter ready cattle. In effect, the numbers of cattle “entering the supply chain” had been slashed in previous years, impacting slaughter rates in 2009 and beyond. In 2009, Australian adult cattle slaughter totalled 7.583 million head – 3.5% below 2008’s 7.853 million head.
While this lack of cattle “entering the supply chain” also influenced the available supply of slaughter cattle in 2010, it was also accentuated by the breaking of the drought in eastern Australia. As such, producers held back breeding stock and retained young cattle for finishing. In 2010, adult cattle slaughter declined 1.5% on the previous year and totalled 7.472 million head. One factor which assisted cattle turnoff in 2010 was producers’ need for cash flow, following years of drought, further encouraged by rising cattle prices throughout the year.
In 2011, while the influence of the poor brandings of previous drought years was being slowly removed from the cattle supply chain, its impact was still being felt in reduced productivity of the younger breeding herd (females that were born throughout 2008 and 2009).
Additionally, the increased number of calves that entered the supply chain during 2010 (especially later in the year) only started to surface in turnoff
rates during the final few months of 2011. These 2010 drop calves are expected to enter the market in exceptional quality, with the bulk of them to be accounted for in the 2012 slaughter year.
In the much disrupted 2011 year, total adult cattle slaughter is estimated to have been 7.325 million head – 2% below 2010 and the lowest annual total since 1996. While lower than initial forecasts, 2011 was a very unusual supply year, hindered by flooding disruptions in the first quarter of the year, temporary processor closures in July and concerns surrounding the impact of the live cattle export ban to Indonesia in the second half of the year.
However, by far the biggest influence upon cattle turnoff in 2011 was the flexibility provided to producers by the sustained better season. Indeed, when prices turned down in winter, producers had the feed and water supplies available to hold off selling stock – something that hadn’t been experienced for many years. Additionally, the ample feed supplies sustained demand for young cattle, with many producers either keen to retain their own stock to take through to heavier weight, or buying cattle in to further finish.
For 2012, many of the features that underpinned cattle throughout in 2011 are expected to remain – especially the better season, ample feed and rebuilding intentions. However, throughput for the year is forecast to increase 3.1%, due to the influence of better marking rates in 2010 and 2011, accentuated by the continued growth in the breeding herd.
While recent years has shown that forecasting the flow of cattle throughout any one year can be challenging, there are several factors that may help to shed some light for the outlook for 2012. One of the key factors for 2012 is the rejuvenated supply of supplementary feed being carried by most cattle producers. After two very productive years, reportedly almost all hay sheds are full to overflowing; silos are packed with feed grain and most paddocks are still carrying good grass cover. This should allow additional flexibility for producers to manage turnoff, especially for breeding stock, if seasonal conditions deteriorate as 2012 progresses or cattle prices suffer an unexpected fall.
With the wet finish to 2011 and forecast for La Niña conditions to continue into early 2012, the available supply of cattle in January, February and March may again be heavily dependent upon the ability of producers to muster and transport stock. However, offsetting this may be the desire for producers to get stock to market to capture some of the higher prices likely to be on offer.
If we do see a return to drier seasonal conditions into autumn, this could be the first real supply test for the market, given the traditional higher turnoff rates throughout May and June, in preparation for winter. If there is a drier autumn and start to winter in 2012, producers will most likely increase turnoff rates.
At the same time, many of the “previous livestock export” cattle that were unable to go on to boats during June and early July 2011 may start to enter the Queensland market, with almost all expected to be in very good condition. These “previous livestock export” cattle are expected to add 5-10% to the national adult cattle turnoff if sold during this quarter and 2-3% for the entire 2012 production year. It is to be noted that, if wet conditions prevail throughout the second quarter, these cattle may be much sought after to boost processor throughput.
Cattle throughput should peak in October and November of 2012, as is the seasonal trend – accentuated if seasonal conditions turn dry.
For 2013 onwards, adult cattle slaughter is predicted to increase steadily, as the influence of the higher herd, improved seasons and increased calf numbers filter through the supply chain. Adult cattle slaughter in 2013 is forecast to reach 7.85 million head, and exceed 8 million from 2014.
With a 3.1% increase in adult cattle in 2012, and an associated small increase in calf slaughter, total beef and veal production for 2012 is forecast to reach a record 2.197 million tonnes cwt. The previous record annual beef and veal production was set in 2006, at 2.188 million tonnes cwt, from 7.985 million adult cattle, compared to only 7.55 million slaughter forecast for 2012.
Contributing to the higher beef and veal production will be a consolidation of the higher carcase weights witnessed in 2011 – with carcase weights in 2012 expected to average 285kg/head cwt. Again, this high average weight for 2012 is due to the good seasonal conditions (and lower cow slaughter percentage), with some influence of additional on farm supplementary feeding, given the abundance of feed grain and lower prices.
Demonstrating the influence of the season on cattle weights, average weights for 2011 were estimated to average 287.3kg/head, up 3.2% year-on-year and over 5% higher than in 2009. Queensland set consecutive record monthly averages throughout the year, peaking at 305kg/head. Even though an estimated 147,000 head less adult cattle (down 2% year-on-year) were processed in 2011, total beef and veal production increased 14,000 tonnes cwt (or 0.7% year-on-year) – to an estimated 2.147 million tonnes cwt in 2011.
With cattle turnoff rising steadily over the medium term, beef and veal production is forecast to approach 2.5 million tonnes cwt by 2016, up 15% on 2011, with average carcase weights remaining above 280kg/head.
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