A bright future ahead for beef industry

A bright future ahead for beef industry

Cattle
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Cattle prices have shown a level of durability over the past 12 months, even with increased supply on the market .

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IT has been another good 12 months for the cattle industry in spite of challenging times and the future looks just as bright.

Dry conditions right across Australia have resulted in critical feed and water shortages for producers and in turn this has contributed to the national herd continuing to contract, but despite these issues cattle prices have remained solid.

Cattle prices have shown a level of durability over the past 12 months, even with increased supply on the market and this has largely been driven by global demand for Australian beef in key overseas markets.

In December when Meat and Livestock Australia (MLA) released its cattle wrap for 2019, it stated finished cattle prices had outperformed the store market for the entire year, but the store market had been buoyed by southern restockers and processors looking to take advantage of robust global beef prices in the past few months of the year.

It reported since the beginning of 2019 (January), the national heavy steer indicator operated at an average premium of 49 cents to the Eastern Yearling Cattle Indicator (EYCI) and in October recorded the largest premium of 65c.

It also stated the strong finished cattle prices seen in 2019 had been supported by surging demand in China (underpinned by the ongoing African swine fever epidemic) and a favourable Australian dollar.

According to MLA a key indicator of the strength of the international market, the US imported 90CL beef, prices, have also been trading at record levels of 928 A/kg, just below its November peak of 968 A/kg.

In terms of WA the markets held relatively steady again in 2019, sitting at similar levels compared to the previous year.

Competition from buyers was again mixed at sales throughout the year, depending on seasonal conditions at the time and market requirements, but demand did strengthen and become more consistent towards the end of the year, particularly on store type cattle which took some hits during the middle of the year.

Prices at weaner sales this season have seen steers sell at similar levels to last year on the back of solid live export, lotfeeding and grazier support, while weaner heifer prices have been somewhat erratic depending on demand.

In the WALSA weaner sales at Boyanup in the past couple of weeks steers have sold up to 346c/kg and $1268, while heifers have topped at 294c/kg and $1075, while at Landmark's special Angus weaner sale in the first week of January, steers sold to 332c/kg and $1218 and heifers made to 270c/kg and $967.

Other good indications of where the market is sitting compared to 12 months ago are the WA cattle saleyard indicators reported in the MLA weekly cattle indicator report.

In the report last week (week ending January 14) the Western Young Cattle Indicator (WYCI) was at 552c/kg carcase weight (CWT), medium steers at 274c/kg CWT and medium cows at 189c/kg CWT.

In comparison in the same week in 2019 the WYCI was at 551c/kg CWT, medium steers 253c/kg CWT and medium cows 164c/kg CWT.

Elders WA zone livestock manager Simon Wilkinson said cattle demand and prices throughout 2019 were solid on the back of strong domestic and international enquiry and 2020 is shaping up to be much the same.

"We have seen in the Elders West zone for the first three months of the financial year (October to December 2019) our average cattle price has been up 3pc on the same period in 2018," Mr Wilkinson said.

"In weaner sales prices have been similar to the previous season and based on figures from weekly MLA reports weaned calves have seen a premium over unweaned calves, and it is pleasing to see many growers now weaning calves."

While store sales and weaner sales saw good demand at the end of 2019 and the start of 2020, PTIC female sales have been at times challenging which Mr Wilkinson said was no doubt a result of tight feed and water supplies.

Last year was an extraordinary year for Australian red meat exports, with domestic and international conditions shifting dramatically.

While the drought induced turnoff buoyed meat supply, China's pull on Australian red meat and a soft AUD supported international demand.

2019 was the third largest year ever for beef exports (behind 2014 and 2015) according to MLA's Australian beef exports monthly trade summary for December 2019.

In 2019 Australia's total beef export was recorded at 1.229 million tonnes shipped weight (swt), which was up nine per cent on 2018.

China was Australia's biggest beef customer in 2019 taking over the mantle from Japan as Australia's top beef export destination.

In 2019 China took 300,133t swt, which was up 84pc on the previous year.

Japan still remains a top destination for Australian beef and in 2019 was our second largest importer, taking 287,497t swt, which was down 9pc on 2018 while the US was third with 251,822t swt, which was up 9pc compared to 2018.

Going forward Mr Wilkinson said the season would have a bearing on the market in 2020, especially when it comes to supply.

"In agricultural areas water and feed reserves across most of the State are low after a dry year last year and this could be a determining factor regarding the number of cattle that come on to the market, especially if producers have to offload females," he said.

"In terms of the pastoral regions from the Kimberley to the Goldfields they have seen mixed results when it comes to recent rain events, some areas have received their annual rainfall in one week while others have had lesser falls.

"Seeing rain in these regions has been pleasing and no doubt will provide some confidence for pastoralists and necessary markets."

When it comes to demand for WA beef Mr Wilkinson said the outlook remained strong from both the domestic, live export and international box trade markets.

"There is still good enquiry from all sectors for WA beef across the complete supply chain.

"With the Chinese New Year falling at the end of January we are anticipating live export demand from China will recommence again in mid to late February and again be strong in 2020.

"We anticipate for producers going forward that pricing and demand will remain strong with similar markets in 2020 as experienced in 2019.

"We are also in regular contact with our east coast counterparts in regards to recovery from recent weather and fire events."

Going forward into this year the domestic and international landscape provides a variety of scenarios for the cattle industry.

Domestically, cattle supplies are expected to tighten, with or without widespread rainfall due to the large turn-off and slaughter of breeding females previously, while internationally, the trading environment centres around China and its need to fill a sizeable protein deficit.

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