Tightening cattle availability and widespread rain fuel price surge

18 July 2016

The Australian cattle market is likely to remain supported for the remainder of 2016, but producers should note some pressures working against the market, according to Meat & Livestock Australia’s (MLA) mid-year cattle industry update.
 
MLA’s Manager of Market Information Ben Thomas said that historically low cattle availability combined with recent widespread rain to most key producing regions has seen an extraordinary surge in cattle prices.
 
Mr Thomas said a number of factors including the positive rainfall outlook, expectations of abundant feed availability during spring and strong restocker competition would all contribute to tightened availability in 2016 as rebuilding of the national herd continues.
 
“Slaughter cattle availability for the remainder of the year is expected to tighten slightly, with the 2016 forecast revised down to 7.4 million head – the third lowest since 1996 and a fall of 18 per cent from 2015,” Mr Thomas said.
 
“With females as a proportion of total slaughter already sitting below 50 per cent, it confirms that the herd rebuild is underway. We’re forecasting that this will dip to as low as 44 per cent as it did in previous rebuilds.
 
“As projected in our January cattle projections, a significant lift in average carcase weights has occurred this year.
 
“In terms of production, beef and veal production is now expected to be 2.17 million tonnes cwt, down 15 per cent. 
 
“We are forecasting that 2017 will now be the lowest in red meat production since 2003 – at just over 2 million tonnes cwt - although the heavier carcases will see a stronger recovery in production in the following years.”
 
Mr Thomas did caution producers that there are a number of factors at play against the current high prices that will inevitably pressure the market in the future.
 
“We need to always be aware that Australia is in a global market. In Australian dollar terms, heavy steer prices are about as close to US prices as they’ve been in 11 years,” Mr Thomas said.
 
“Also, cheaper South American product will represent more serious competition for market share in some of our existing overseas markets.
 
“Ultimately though, 2016 will see price support continue for Australian cattle but the price pressures will mount at some point.
 
“Restockers looking at paying 660 cents per kilo for young steers now will need to consider how many kilos they can add and how quickly in order to profitably utilise the expected abundant supply of spring feed.”
 
Click here to read the 2016 mid-year cattle industry update.
 
Click here to watch Ben Thomas outline the mid-year cattle industry update.
 
MLA currently provides a range of market information services including daily red meat market news updates, regional saleyard reports, live export information and price indicators.
 
Producers who want regular market information delivered twice weekly into their e-mail inbox should subscribe to MLA’s Meat and Livestock Weekly e-newsletter. To subscribe, email info@mla.com.au.

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