Cattle herd rebuild has plenty left in it
MLA's 2018 projections: Supplies to remain tight
THE push to rebuild herds, spurred by optimism from growing global demand for beef and a belief in long term profitability, looks set to once again dominate the cattle market story in 2018.
Where decent rain is added to those underlying dynamics, the ongoing herd rebuild should restrict cattle flow, fuel restocker demand and keep solid pressure on prices.
The 2018 Australian cattle projections from key industry body Meat and Livestock Australia (MLA), released today, have supplies remaining tight this year with only a 3 per cent rise in adult slaughter to 7.4 million.
The heavier carcase weights of 2017 won’t feature as much, which should see beef production lift just 1pc to 2.17 million tonnes carcase weight.
Today’s forecasts are tighter than MLA had previously flagged but some livestock agents and producers believe they might still be slightly ambitious.
Despite the subdued nature of demand in the past month, restocker appetite, given the right seasonal conditions, is ferocious, they argue.
One point there is widespread agreeance on: rain in Queensland, home to around half the national beef herd, is the critical factor.
NSW agent Shad Bailey, Colin Say and Co at Glen Innes, said the market downturn of the past month had been due purely to dry conditions, especially in the north.
Yet at New England sales this week, young cattle were still making over $4 a kilogram, with heifers predominantly going back to the paddock as breeders and steers to backgrounders, Mr Bailey said.
“Restocker demand is still hot and there is big female support,” he said.
“The rebuild still years left in it. It doesn’t happen overnight - it was a huge sell-off we went through.
“In the south, the Wagyu boom has also taken big numbers of Angus females out of the mix and live export has been stronger in recent years with Angus females and steers - all this has added to the need and desire to replenish.”
With weather models predicting rainfall across large sections of Queensland pastoral country this weekend and the outlook for the rest of the northern wet season slightly positive, the case for a rebuilding ramp-up is strengthened.
Bank analysts said cattle prices should stabilise while the rain event remained a possibility.
However, the window in terms of establishing a body of feed for winter in the driest parts of Queensland, including the north west, is closing fast, consultants said.
“The next three to four weeks will be critical - it will shape what feed restockers can count on,” Queensland’s Ian McLean, co-author of the recently-released Australian Beef Report, said.
“For producers, it will come down to having a look at what time is left and making timely decisions - the sooner they act the better.”
MLA’s latest kill data shows the female slaughter is still in rebuild territory, averaging 45pc of the adult kill, and MLA analysts say the annual total is likely to remain under 47pc for the next few years.
MLA has the national herd reaching its pre-drought, or 2012, levels by 2020 under average seasonal conditions.
Market intelligence manager Scott Tolmie said the dry winter and spring across many parts of Australia saw a higher than expected turn-off in the second half of 2017, temporarily halting the herd rebuilding efforts of producers in affected areas.
“This has meant many young cattle were pushed into feedlots in 2017 due to lack of decent pasture – stock that otherwise would have been finished in the paddock and come to market in 2018,” Mr Tolmie said.
“This is part of the reason there is an expectation of tighter slaughter numbers than previously forecast in 2018, as these producers, particularly in Queensland, look to rekindle rebuilding efforts.
“If the three-month rainfall outlook from the Bureau of Meteorology comes to fruition for February to April, it is likely to see tight supplies in certain regions, particularly through the mid part of the year.”
There is broad belief the run of record numbers on feed has come to an end, with MLA’s forecasts for a decline towards the 850,000 to 950,000 head mark after three consecutive quarters of over a million head.
Increasing grain prices and the growing gap between feeder and 100-day finished over-the-hook prices will influence this trend, MLA says.
That price differential is driven by the relatively deep pockets of restockers competing for young cattle and, at the other end, increased United States competition in key grainfed export markets.