June 17, 2020
Australia's cattle prices to increase on output, exports drop
Over the next 12 months, cattle saleyard prices are anticipated to climb by 4% on average as low supply constrains production and export volumes, Australia's agricultural bureau released today, Beef Central reported.
In its June quarter outlook report, the Australian beef cattle herd remains at 30 year low, currently estimated at 21.1 million head, the lowest since 1989-90.
Lower turn-off from the smaller national herd, and cattle being retained for restocking and herd rebuilding, will constrain beef production and exports over the short term.
With gradual restocking over the next 12 months, Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) expects the herd to increase to 21.5 million head by June 2021.
Global demand for beef is described as "robust" in the short term, but COVID-19 has increased uncertainty in export markets.
ABARES expects these factors to lead to a 4% lift in the average saleyard price of steers and cows in 2020–21, to 556 cents per kilogramme.
After two years of drought, widespread and above average rainfall earlier in 2020 has led to pasture growth in South Eastern Australia, with models also pointing to above average pasture growth over most of eastern Australia and particularly in Queensland over winter.
Winter is typically a period of low rainfall and pasture growth and a recovery in pasture biomass in the west and tropical north will still require a more favourable monsoon in the summer of 2020–21.
Australian beef production is forecast to fall by 17% in 2020–21 to 1.9 million tonnes.
A 7% fall in the number of cattle slaughtered since February has been partially offset by an increase in average slaughter weights, reflecting the high number of animals in feedlots and a declining share of females.
Female slaughter rates lower than around 47% indicate herd rebuilding is taking place. After averaging 56% in 2019, female slaughter rates fell to an average of 52% in the first three months of 2020, and in Queensland averaged just 44% between January and May.
Female slaughter rates are expected to continue to fall throughout 2020 as herd rebuilding gains momentum, ABARES predicts.
However, it adds that the pace of herd rebuilding will be limited in some cases by the high price of restocked animals and limited cash flow after years of drought.
The volume of beef exports is forecast to fall by 22% in 2020–21 to 995,000 tonnes, in line with the forecast fall in production.
However, the overall value of beef exports will not fall as significantly due to anticipated increases in export prices.
In contrast to the forecast 22% fall in export volumes in 2020-21, export value is forecast to fall by 19% to AUD8.9 billion (this is down from AUD11 billion in 2019-20, when overall value of exports was enhanced by drought-related turn-off and high global prices).
The ongoing shortage of protein as a result of outbreaks of ASF in China has continued to support global beef prices.
Data to March 2020 indicates that the overall impact of COVID-19 on Australia's beef exports has been small, ABARES said.
Average export unit values were 5% higher in the first quarter of 2020 compared with the previous quarter, and 16% higher than the same quarter last year.
This was partly the result of a lower Australian dollar, which depreciated sharply in March.
ABARES notes that exports of high-value products normally destined for foreign food service channels were disproportionately affected early in the pandemic.
Australia is potentially well positioned because of its low levels of community transmission.
If Australia is able to maintain this status and keep its supply chains functioning efficiently, Australian beef producers may benefit from temporary supply disruptions in competing nations. It could also help Australia build its reputation as a reliable supplier of quality meat.
The volume of beef exports to China is expected to reach 324,000 tonnes in 2019–20, up from 228,000 tonnes last year.
Exports to the US are forecast to reach 226,000 tonnes in 2019–20, 6% lower than 2018-19.
Export volumes to other major markets such as Japan and Korea remained relatively unaffected by extensive COVID-19–related restrictions in both countries, with retail sales remaining relatively strong.