November 7, 2006

 

The worse yet for Australian cattle producers
 

 

The number of cattle in Australian feedlots fell in the third quarter from a record in the second quarter, signaling what could be the start of a serious downturn for the industry as the impact of a severe drought begins to sink in, the Australian Lot Feeders Association, or ALFA, reported Tuesday.

 

The number of cattle in feedlots fell 6.3 percent to 881,281 at the end of the third quarter, but was still up 11 percent from the year-earlier quarter, according to a quarterly survey issued by ALFA and marketing concern Meat & Livestock Australia Ltd.

 

Out turn of beasts during the third quarter was up 10 percent from the second quarter and was up 4.6 percent from the year-earlier period.

 

Malcolm Foster, ALFA's president, said the drop in numbers in feed in the third quarter from the second was within normal fluctuations, but also pointed to tougher times ahead for the industry.

 

"The easing in numbers could also be reflecting the concerns of feedlot operators over the recent rapid increases in grain costs," a major cost for the industry, he said in a statement.

 

Margin pressures are mounting due to strong global grain prices and a severe drought-induced shortage, which have pushed local prices sharply higher in the past two months.

 

Feedlot margins will remain tight through most of 2007, with little relief expected until the 2007 grain harvest nears, and with little relief coming from any drop in cattle prices, he said.

 

The third quarter fall in numbers is not a major correction, and there might be further falls in coming months, which would be serious for the whole industry, he said.

 

Any upside for international beef prices is not likely, he said, with US product now entering both Japan and South Korea, two of Australia's three major export markets.

 

A record of more than 2.6 million animals were fed grain in Australian feedlots before slaughter in 2005-06, almost one-third of the total 8.4 million cattle slaughtered in that year in Australia.

 

About one-third of beasts on feed in the third quarter were destined for the domestic market, with the balance going to export, chiefly Japan.

 

South Korean demand for Australian grainfed beef rose to a record 14,038 tonnenes in the third quarter, 63 percent higher than in the second quarter, while exports of grainfed product to Japan rose 4 percent in the third quarter to 49,156 tonnenes.

 

Foster said the industry hopes applications to import grain will proceed swiftly so that commercial shipments can begin as soon as possible and bring relief to livestock producers.