Cattle projections

It has been a tumultuous start to the year for the cattle industry, with drought and flooding heavily impacting slaughter and herd levels. Dry conditions during summer have driven a continuation of the herd liquidation and combined with stock losses from the floods in north-west Queensland (estimated between 500,000 to 700,000 head), will result in the largest drop in the national herd in decades.

Much-needed rainfall in many drought-stricken parts of Queensland through March provided some reprieve, but many producers destocked heavily throughout summer, as feed costs and lack of stock water left them with few alternatives. Forecast adult slaughter for 2019 has been revised slightly higher, but is still expected to be below 2018 levels at 7.7 million head. The revision is largely driven by harsher-than-expected seasonal conditions during the first quarter and subsequent accelerated slaughter. The Queensland floods will have reduced the pool of available slaughter and export cattle. However, this is being masked by the current elevated drought-induced turnoff with the poor conditions set to persist across many parts of the country and the latest Bureau of Meteorology (BOM) forecast showing no strong indication of significant immediate relief.

Feedlots have remained near capacity, but lower entry weights and the high cost of feed has impacted feeding margins. Elevated female slaughter and lighter sale weights, due to poor pasture conditions, have led to lower carcase weights so far this year. This trend in carcase weights is forecast to continue, which combined with slaughter figures, will underpin a 3% decline in production this year, to an estimated 2.2 million tonnes carcase weight (cwt).

International demand for Australian beef has held strong, supported by a depreciating Australian dollar and double-digit export growth to both China and the US in the first quarter of the year.

Finished cattle prices have remained steady but young cattle and cows have experienced significant fluctuations in recent months. As always, weather will be a key determinant of future prices, with recent support indicative of the strong restocker intent. However widespread follow-up rainfall is needed. The longer the herd remains in liquidation, the sharper the expected price correction when it re-enters rebuild territory. Looking ahead, the significant depletion of the herd will result in lower slaughter rates and fierce rebuilding competition once there is a widespread break in the weather. Even if there is a consistent string of reasonable seasons, it is expected to take a number of years before the national herd is back to its longer-term average of 28 million head.

 

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Contacts @ MLA