Pressure mounts with US cattle supply lifts

25 Apr, 2018 08:55 AM

CATTLE market declines have received some reprieve from a dropping Australian dollar, which has shifted the price of our beef back towards competitiveness with the United States market.

However, big volumes are expected out of United States feedlots in the next quarter and that supply lift is set to put a fair bit of pressure on.

Projections have been that intensified competition in global beef markets, spearheaded by excess US production looking for a market offshore, would combine with increased Australian cattle supply to deliver a gradual price decline at the saleyard this year.

The current relief, with the Australian dollar declining 1.5 cents against the US currency in the past week, will likely be short-lived.

Commonwealth Bank analyst Tobin Gorey said the gap between grainfed and grassfed competitiveness was now substantial.

Implicit in finished cattle prices in the near term would be the cost of feed, which right now is very expensive on the back of a shortage across the eastern seaboard, he said.

“Grassfed cattle are close to being competitive and bringing buyers back to the market,” he said.

“We think that is a somewhat cruel irony given how little grass there is in many pastoral regions right now.”

The EYCI, while currently sitting 161c/kg lower than where it was last year, remains above the five-year average.

But the degree of volatility was high, such that a week’s good rain in Queensland could easily push it up to the 600 mark again, Mr Gorey said.

“Every time it rains, pastoralists become buyers and that pushes prices back up,” he said.

“Underpinning everything is that over next three to four years, there needs to be a herd rebuild so that will support prices.”

Shan Goodwin

Shan Goodwin

is the national beef writer for Fairfax Agricultural Media.


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