Grids lift as cattle supplies tighten

30 July 2015


Eastern states weekly slaughter, as reported by MLA’s National Livestock Reporting Service, was steady last week but tracked 4% below year-ago levels, at 164,553 head. In response to the tighter supply situation, over-the-hook indicators across the eastern states have seen solid gains in recent weeks.

Driving the year-on-year decline in slaughter were the southern states. Queensland, however, continued to kill high volumes, processing almost 89,000 head last week. In fact, as illustrated in Figure 1, the combined southern states (NSW, Victoria, SA and Tasmania) weekly slaughter has been in decline since mid-April while Queensland has tracked sideways.

 

ES-weekly-kill.bmp

 

However, slaughter across the country still remains historically high, with the pre-drought five-year weekly average for the eastern states closer to 130,000 head.

The divergence in weekly kill between the north and south has been reflected in grid prices. The grassfed trade steer indicators (240-260kg carcase weight, A-C muscle) in NSW and Victoria are currently trading at a 30¢/kg cwt premium to similar lines in Queensland. To a lesser extent, premiums also exist across medium and heavy steers and MSA categories.

However, with some grids across Queensland lifting 20-40¢/kg cwt over the past week, as northern processors anticipate a contraction in supplies, the discount to southern cattle is below what it has been in recent weeks.

In fact, the Queensland over-the-hook medium cow indicator (260-280kg, A-E muscle) lifted 33¢/kg cwt week-on-week, to average 445¢/kg cwt this week, surpassing the same lines in NSW (429¢/kg cwt) and Victoria (437¢/kg cwt). The strong gains in the Queensland over-the-hook cow market, however, can also be attributed to the strong export lean manufacturing beef price, with many of the major export processors located in the region – so far this year, 53% of Australian manufacturing beef exports have been shipped from Queensland ports. This week the US imported 90CL cow price averaged 724.6A¢/kg (CIF), up 3% week-on-week and 16% above year ago levels.

For the full list of state over-the-hook indicator and slaughter reports, please click here.

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