Cattle slaughter is forecast to drop 3% to 7.6 million head in 2019, as persistent dry conditions in many key cattle producing regions have heavily reduced the size of the breeding herd and potential pool of available finished cattle. The national herd is now expected to fall to its lowest levels since the mid-1990s – the dry conditions that swept across NSW and south-west Queensland have undone much of the rebuild achieved since the 2013–2015 drought. The prospect of another below average northern wet season and a largely negative three-month rainfall outlook will likely mean many producers that retained stock in 2018 will commence or continue destocking in the months ahead.
Compared to last year, many producers entered 2019 with depleted feed stockpiles, hoping for a turn-around in seasonal conditions to avoid mounting feed costs. The number of cattle on feed is expected to drop from the record levels reached in 2018 to around one million head, on average, in 2019. Lot feeders face similar feed cost pressures but remain incentivised by strong international demand for grainfed product and a lack of alternatives for finishing cattle in the current conditions. Carcase weights are expected to drop below 290kg/head as the female kill remains elevated and the ability and cost to finish cattle remains challenging. In line with the forecast decrease in slaughter, beef production is projected to drop 4% to 2.2 million tonnes carcase weight (cwt) in 2019.
Many factors are set to assist export prices in 2019, such as a low Australian dollar and the largely positive shifts in demand for Australian beef in key markets. However, increased supplies from the US and Brazil will see competition ramp up, while the unfolding US-China trade war may act as an economic handbrake in two of Australia's major beef markets and have wider implications for the global economy, threatening to dampen any significant upside potential.
Overall, the development of seasonal conditions in Australia will likely override these global forces in the near-term. Any further destocking will see downward pressure on prices, particularly for store condition cattle. Finished cattle will likely remain supported to some degree, given lower supply and strong demand fundamentals. If there is a major improvement in seasonal conditions across eastern Australia, supplies will tighten sharply and fierce restocker competition may re-emerge, as was the case in 2016. The elevated level of female slaughter in 2018 means breeder cattle, in particular, will remain in short supply and high demand if conditions improve. Many producers will be eager to hold onto breeders they still have to avoid the expensive exercise of restocking when conditions turnaround.
Beef Cattle survey
To be run twice a year, MLA's beef cattle survey aims to monitor beef cattle production and producer intentions, in order to provide a strong foundation for MLA's projections and assist producers to make more efficient decisions based on data and evidence.
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