While store cattle markets this past week have corrected under the influence of adjusting and low slaughter market rates, it has been of interest to read the latest beef industry projections from Meat and Livestock Australia (MLA).
Therein MLA has advised tight supplies will remain the driving force behind the support of short term cattle prices (and into the rebuilding phase). However longer term prospects – beyond 2018 – prices are expected to settle somewhere in between existing long-term averages and the current record highs.
That is possibly not the news that most cattle breeders would want to hear, especially those who have forked out upwards of $2000 to $3000 for breeding females that will, some time in the future, reward them with a smaller than anticipated calf unit sale price.
There is no doubt the past three to four years of severe drought conditions has exacerbated hardships for many cattle breeders, particularly those peeved by the past discomforts of two or more decades of below average cattle price returns. And these conditions combined have resulted in the severe and sharp decline in the nation’s herd numbers that have plunged to a 20-year low. They are estimated at 26.3 million head, according to MLA calculation in this month’s update.
MLA says restockers are the driver of the current record prices of young cattle. It says the restocker purchase premium is currently 49c/kg lwt or 8 per cent more than processor payments, within the market data captured in saleyards by MLA that leads to the compilation of the Eastern Young Cattle Indicator (EYCI).
This compares adversely to the restocker premiums of 6pc and 5pc paid in 2010 and 2011 respectively, it states.
MLA expects the extremely tight supply conditions to remain for the duration of 2017, before slowly increasing from 2018 onwards. It also suggests that the rebuilding phase will take longer in the most depleted areas on western Queensland and NSW where declines of up to 40pc were recorded in just three years, whereas in other areas the declines were up to 20pc.
MLA says while Australia cattle supplies are at such tight levels, Australian cattle producers are being insulated from generally softer global markets. And with Australian prices moving in a different direction to those globally, it becomes more likely that once Australian production eventually increases, prices will realign with global markets.
Exactly where this level may be will depend on global demand, export success, international competition and the strength of the dollar at the time.
Let’s all hope that is not “the higher the peak, the deeper the trough” scenario because those investing currently may get severely hurt financially.
