MLA’s 2017 Cattle Industry Projections released
24 January 2017
The Australian beef industry will more than likely continue the first half of 2017 in much the same fashion as last year – tight supplies, robust restocker demand and the subsequent likelihood of a strong young cattle market, according to MLA's latest cattle industry projections.
As the year progresses though, beef production is expected to slowly start increasing again and, as this eventuates, some downward pressure is likely to be placed on the market.
Expectations are for a further 3% decline in Australian cattle slaughter in 2017, to 7.1 million head. While this is a significant fall, it’s not nearly to the same extent that was seen over the past 12 months, when an extremely rare 19% drop occurred.
Despite forecasts for slightly heavier cattle, Australian beef production is forecast to follow suit and decrease 3%, to 2.1 million tonnes cwt. Again, it’s the first half of the year that is most likely to see supplies at their tightest, and production will probably start slowly rebuilding thereafter.
The number of cattle on feed is forecast to remain constrained by the still very high feeder cattle prices, which closed 2016 up 80% from the pre-surge average levels. While entry cattle prices remain dear, solace comes from cheaper Australian feed grain prices and, under this scenario, forecasts are for cattle to stay on feed for 10-30% longer than what otherwise would have been the case. The overall outcome is the expectation for numbers on feed to range from 700-750,000 head per quarter, and turning off just over 2.5 million head (35% of total adult slaughter).
Moving onto prices, the Australian market is following a similar pattern to what occurred in America, although just 1-2 years behind. Once the US market broke through its long-term average trading range, it took just over two years to hit a high, before taking 15 months to lose much of the gains. Encouragingly though, the US has stabilised 38% above the previous level, which potentially indicates a new floor.
While Australian cattle prices also took two years to reach a peak, only the very early stages of a decline are imminent and a major price easing is likely to await a more balanced cattle market (probably from 2018), as production builds and restocking pressure recedes. Hypothetically, if Australia does follow the same pattern as what occurred in the US, and taking into account other factors, like global production and cattle/beef price forecasts, the Australian cattle market could see a 20-40% decline from the peak, yet settle at a similar magnitude above the 10-year average.
Australian beef and veal exports are likely to correlate with the lower beef production and are estimated to decline a further 5% in 2017. While this is expected to be the third consecutive fall, it will still be the fifth highest export volume on record.
The domestic market is showing some stronger signs and per capita beef consumption in Australia is forecast to rise slightly in 2017, edging close to 26kg per person.
Live exports will also continue to be challenged by the smaller pool of cattle (especially in the north), resistance from some markets at current price levels and continued uncertainty around import policies. For 2017, live exports are forecast to be 800,000 head, down a further 24% – following on from the 21% decline that occurred last year.
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