August 15, 2007

 

Australian cattle feedlots down 0.4 percent in Q2

 

 

The number of cattle in Australian feedlots slightly tumbled 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.

 

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, statistics from ALFA and marketing concern Meat & Livestock Australia Ltd.

 

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

 

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

 

The slump in grain production was due to drought, high Australian currency and biofuel boom which kept grain prices high, Foster said in a statement.

 

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

 

Japan is the major destination for Australian grain fed beef exports, with grainfed exports to Japan down 16 percent in June on month, he said.

 

Australia is the second-biggest global beef exporter by volume after Brazil, with the value of exports approaching A$5 billion (US$4.15 billion). Exports take two-thirds of total domestic production.

 

Grainfed beef to South Korea also fell 41 percent on quarter, with ongoing uncertainty around the re-entry of the US and the strong 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.

 

Feedlot cattle totalling 2.67 million in fiscal year ended June 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 around 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, he said.

 

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 now is changing with US beef trickling into both markets.