July 24, 2020

COVID-19 crisis cuts Australia's cattle on feed

 

 

The number of cattle on feed in Australian feedlots is drastically diminishing due to uncertainty in global beef markets, ABC Rural reported.

 

Nationally, the number of cattle in feedlots has been declining since the start of the year, with numbers dipping below 1.1 million head of cattle on feed for the first time in two years.

 

President of the Australian Lot Feeders' Association, Bryce Camm said numbers dropped from nearly 1.4 million head on feed at the end of 2019 to just over one million earlier this year.

 

"The January to March quarter saw a 12% reduction in cattle on feed after almost two years of record growth in numbers," he said. "That was largely because of the rainfall events through February, which saw a lot of people hold onto cattle."

 

The rain in February and March also boosted Australian cattle prices as graziers, particularly from New South Wales, competed against feedlots and abattoirs for the same cattle.

 

Since April, the number of cattle on feed has halved at Lotus Park Feedlot, 200 kilometres north of Rockhampton. Manager Harry Kemp said when COVID-19 hit forward contracts for meat started tapering off, resulting in abattoirs reducing demand for cattle.

 

"We are normally a 6,000 to 6,500 head feedlot, but at the moment we have between 3,000 and 4,000 head of cattle on feed, so that is sort of half," he said.

 

Gympie-based meat processor Terry Nolan said the market was currently too "volatile" to pay top dollar for cattle.

 

"There are as many cattle out there as you want to buy," he said. "Everyone says there are shortages, but that's code for saying the cattle that are out there are probably making too much money.

 

"It is the price pressure that's stopping people, because sure the herd is down.

"But if the herd was down and cattle prices were up and you were confident about selling the meat, you'd just go out there and buy [cattle] regardless.

 

"If you talk to Victorian processors, a number of them are having stand-down days or part shutdowns, whereas in Queensland we are a bit fortunate in that …about 60% of the national herd is in Queensland, so we've managed to still find enough cattle."

 

But Nolan said some Queensland abattoirs had reduced kill shifts, depending on the market they served.

 

"Obviously we've seen some plant suspensions with China over labelling and other issues—that would cause a slowdown, you can't just create a market overnight.

 

"We've seen an appreciation in the Australian dollar, so that's had a bit of an effect. The COVID issues around the world have had an effect and made freight difficult at times, whether it be sea or air freight.

 

"And in the China market, we [Australia] have triggered the safeguard tariff again, so the import tariff for China has gone from 4.8% up to 12%.

 

Also impacting Australian feedlots and abattoirs is the situation in the US, where there is a backlog of cattle in feedlots waiting to be processed after the pandemic forced abattoirs to shut.

 

Kemp said Australia was "a little fish in a big pond" when it came to the global beef market.

 

"If America and Brazil come back online, they have a lot of cattle sitting on feed waiting to be killed," he said. "There will be a lot of meat that will come onto the world market."

 

"I think there will be a suppression in world beef prices, and yes, it will affect Australia," he said. "But I guess the softening effect there is if there's an extra amount of fat grain-fed beef coming on the market, the US still requires some of our leaner trim to balance up their fat trim for the quick service restaurant trade.

 

"So it's very hard to quantify the size of the impact on Australia, but I think what we're saying is, there's room for caution. I wouldn't like to plough in and buy my years' worth of cattle now—I think I'd be a bit more conservative, buy a few now and buy a few later."

 

Despite the challenges, Camm did not expect Australian feedlot numbers to decrease much more.

 

"From my perspective, I think we've seen the level out," he said. "If I was brave enough to make a prediction, I think we will see a stabilisation of cattle on feed somewhere around the million head mark."