August 14, 2007

 

Australian Q2 cattle numbers in feedlots down 0.4 percent from Q1
 

 

The number of cattle in Australian feedlots slipped slightly in the second quarter from the first quarter to be well down on-year as the industry starts to react to a sharp cost squeeze, the Australian Lot Feeders Association, or ALFA, reported Tuesday (Aug 14).

 

The number of cattle in feedlots fell 0.4 percent on-quarter to 870,025 in the second quarter to be down 7.5 percent on-year, according to a quarterly survey issued by ALFA and marketing concern Meat & Livestock Australia Ltd.

 

ALFA President Malcolm Foster said the result goes against the usual trend of an increase in cattle on feed in the calendar first half.

 

The fall in cattle numbers on feed related directly to the widespread lack of profitability the industry is experiencing, he said.

 

Foster commented that the drought-induced slump in grain production in 2006 and international bio-fuels demand have combined to keep grain prices high.

 

"Also, the escalation of the Australian dollar this year has really started to bite on beef prices internationally," he added.

 

The value of the Australian currency against the Japanese yen strengthened 18 percent in the second quarter on-year, Foster said.

 

Japan is the major destination for Australian grainfed beef exports, with grainfed exports to Japan down 16 percent in June on-month, according to Foster.

 

Australia is the second-biggest global beef exporter by volume after Brazil, with the value of exports approaching A$5 billion (about US$4.189 billion). Exports account for about two-thirds of total domestic production.

 

The second quarter also saw shipped tonnages of grainfed beef to South Korea fall 41 percent on-quarter, with ongoing uncertainty around the re-entry of the US and the strong Australian currency cited as the main causes.

 

Total out-turn of beasts from lots of 643,887 in the second quarter fell 2.2 percent on-quarter and 1.8 percent on-year.

 

Out-turn from feedlots of 2.67 million beasts last fiscal year ending Jun 30, 2007, was an all-time annual record and accounted for about 30 percent of the total number of cattle slaughtered in Australia in the year.

 

Foster said feeder cattle prices should fall going into spring, helping restore confidence in the sector, which has been weathering rough trading conditions through 2007.

 

Feed grain prices fell about 6 percent in the calendar first half from the second half of 2006, but average feed wheat prices in the second quarter were still 45 percent higher on-year, while sorghum prices were up 52 percent and barley up 75 percent over the same period, he said.

The coming harvest of winter crops starting in October, which should put downward pressure on feed grain prices, will be an important factor for the industry, Foster added.

 

A little over two-thirds of beasts on feed in the second quarter were destined for export markets, chiefly Japan, with the balance going toward domestic demand.

 

Total feedlot capacity was little changed at 1.1 million places in June from March.

 

Demand for Australian beef has been strong since early 2004, mostly due to a lack of competition from the US in Japan and South Korea, though this is now changing with US beef trickling into both markets.