Stifled by unrelenting drought and compounded by the national bushfire crisis, Australian cattle producers endured an extremely difficult start to 2020. However, for many, the outlook has changed dramatically on the back of widespread and consistent rainfall since February.
These vastly improved conditions, combined with a positive rainfall outlook, have led to a forecast adult cattle slaughter in 2020 of 6.9 million head, a drop of 19% on 2019. From a cattle supply perspective, the impact of improved conditions on producer intentions is anticipated to see cattle turnoff decline to the lowest point since the mid-90s and remain at historically low levels for the next two years. For the first time since 2017, many producers are now in a position to seriously consider rebuilding depleted herds, in particular for those across southern Queensland and New South Wales.
National beef production is forecast to decline 16% to 2.05 million tonnes carcase weight (cwt), with increasing carcase weights offsetting some of the decline in slaughter. Greater feed availability, low stocking rates and historically high cattle prices, should all combine to place producers in a position to feed for longer and to finish to heavier weights. However, the intense competition for store cattle will challenge the lot feeding sector and the number of cattle on feed is anticipated to ease, limiting the upside potential for average carcase weight gains.
In terms of the global protein trade, the emphasis for the start of 2020 was on the protein deficit in China, created by the impact of African Swine Fever on pork production. This remains a critical issue for markets to contend with, however, its disappearance from headlines came as the unprecedented impact of COVID-19 emerged. The impact on the meat industry from COVID-19 is impossible to predict, but is likely to include an Australian and global recession, a temporary collapse in foodservice demand, reduced demand for higher value meat cuts and some disruptions to supply chains and trade.
Critically, China appears to be emerging from their COVID-19 shutdown, with strong meat import demand beginning to return. However, the crisis is escalating in the rest of the world and will continue to disrupt the consumption of Australian red meat domestically and internationally in the coming months. Balancing the uncertainty of COVID-19 with other key factors, such as African Swine Fever and US-China Phase-One Agreement, will be critical for the performance of Australian red meat in 2020.
Australian cattle prices surged to record levels across all categories in March. Young cattle and breeding stock have seen demand rise significantly on the back of improved seasonal conditions, as restockers, feeders and processors compete over a reduced pool of livestock. Finished cattle prices found support and reached historically high levels, however, global demand uncertainty has applied downward pressure to prices in recent weeks.
Looking ahead, driven by limited supply availability, domestic conditions continue to be a key factor influencing Australian cattle prices. However, developments in local and global markets, specifically foodservice demand and ongoing economic conditions, will continue to pressure prices.