August 6, 2020

 

Australian cattle prices officially tops US'

 


According to Meat & Livestock Australia's mid-year industry projections update, Australian cattle prices are now significantlyhigher than their US counterpart, with Uruguay a distant third, Beef Central reported.


In an earlier Beef Central article in March, the difference between US and Australian cattle prices narrowed to practically zero, with the transition now official.


For the past decade, Australian cattle prices have rarely topped equivalent prices in the US, last occurring briefly in 2016, when Australian producers rebuilt cattle herdswheninternational beef demand was on the rise. At the same time, US cattle prices were being pushed down by drought turnoff.


While the near-record high cattle prices have been driven by the overall livestock supply shortfall resulting from herd reductions following two years of drought, other factors were also involved, according to MLA analyst Adam Cheetham.


"We saw US livestock prices really fall off a cliff, while wholesale meat prices went in the opposite direction during COVID," Cheetham said. "In fact the re-positioning in global beef prices is as much to do with lower US and South American cattle prices, as it is about price rises in Australia," he says.


An excess of US fed cattle supplies has resulted from the back-up in slaughter cattle that occurred during mass US processing plant closures due to COVID-19 in May and June. This has pushed US cattle prices sharply lower, and the price trend was likely to continue through at least August and September, according to Steiner's Daily Livestock Report.


Another factor is that the Australian dollar is currently trending higher at US71.8c on August 6, up about 6c since early May.


"I don't think we would have anticipated that appreciation happening back when the value dropped so severely in April," Cheetham says. "The recent currency movements aren't doing Australian export processors any favours – that's for sure," he says.


"It's a challenge, but we also have to look at the positives – the fact that livestock prices are so strong clearly signals the improvements in domestic conditions. Counter to trends in all previous droughts in Australia, strong international beef demand, led by China's African swine fever outbreak, kept cattle prices very buoyant over the past two years of drought sell-off. We have really come off a high base," he explains.

 

In summary, global conditions have yet to offsetthe improved domestic market.


MLA warned that Australia now faces a cattle market out-of-sync with key competitors and with an impending global recession.


Any assessment of the likely trend in finished cattle prices needed to balance the negative impact of COVID-19 across markets and channels and the potential for increased competitor pressure, against tighter Australian supplies and the ongoing protein shortfallcaused by African swine fever.


Together, these factors create an uncertain, evolving and challenging scenario, MLA said.