After contracting for two years, the national cattle herd is expected to increase by 2% to 25.2 million head in 2021 as it enters a rebuild phase. This rebuild comes after Australian cattle numbers fell to their lowest level in two decades in 2020 following prolonged severe drought.
Improved seasonal conditions in southern Australia throughout 2020, and above-average summer rain in northern Australia during the 2020–21 wet season, are expected to produce an abundance of pasture in all major cattle producing regions, with the exception of parts of WA.
Cattle supply is expected to tighten in 2021, as producers retain more breeding stock to rebuild their herds. The increase in heifers being retained for breeding purposes will cause the female slaughter percentage to drop in the second half of 2021, this is expected to fall below 47%, signalling a technical rebuild.
Producer intentions to retain more cattle will also see slaughter levels fall further. In 2021, cattle slaughter is expected to fall 3% to 6.9 million head, with calf slaughter expected to drop by 7%, demonstrating producer preferences to hold onto young cattle rather than turn them off into the vealer market. During the first few weeks of 2021 this dynamic has already been evident, with yardings and slaughter numbers down on year-ago levels.
Unlike during previous rebuilds, prices are at record highs, which may motivate some producers to take advantage of these prices and offload cattle. However, the biggest impact will be on carcase weights, as both high prices and the availability of feed will incentivise producers to feed for longer to achieve higher weights and greater returns. The growing size of the feedlot sector, with over 1 million head currently on feed, will also contribute to rising carcase weights, in 2021 these are predicted to rise by 9.3kg/head to a record 301.3kg/head.
Beef production is forecast to be 2.1 million tonnes in 2021, similar to levels recorded in 2020 and 2017 (the year of the last herd rebuild). This would also be well below production during 2018 and 2019, reflecting increasing stock retention after years of elevated turn-off and large-scale destocking.
Export levels are expected to lift 2% in 2021 to 1.1 million tonnes shipped weight (swt), growing to 1.2 million tonnes swt in 2023. In 2020, COVID-19 affected demand for beef in key markets due to the global drop in foodservice activity and market access issues. Global GDP growth of 5% is forecast in 2021, which should see global demand for beef rebound.
Australian beef exports are forecast to grow 10% over the next three years. During these years, it is expected that China’s domestic pork production will recover from the recent African Swine Fever (ASF) induced trough, reducing the current global protein deficit. Meanwhile, beef from South America currently being exported to China to meet the nation’s protein shortage may subsequently flow to other markets where Australia has considerable market share. As a result, Australia will need to invest in growing and consolidating new and existing markets.
This year represents uncharted territory for Australian beef producers. The herd rebuild is likely to be more gradual than previous ones, owing to a smaller breeding base and one of the worst droughts on record. The herd is also reduced, prices are high and although the COVID-19 recovery is beginning, its impacts will still be felt for years to come. All of these factors represent opportunities for the Australian beef industry to improve its domestic and global standpoint, and challenges that will require adaptation to overcome.