AFTER years of sky high cattle turnoff it all had to come to a head for the Australian beef industry – and 2016 was the year it did.
Unprecedented tight supplies of cattle coupled with buyer demand both domestically and internationally meant Australian cattle prices had to get dearer.
There had been warning signs for some time and many an opinion piece by analysts and stock and station agents in Fairfax Media agricultural publications predicted it was only a matter of time before much of the cattle producing country got rain and spurred on restocker confidence.
Meat and Livestock Australia market information manager Ben Thomas projected the extremely tight supply situation would remain for the duration of next year, before slowly increasing from 2018 onwards.
Current estimates put the Australian herd at 26.2 million head which historically means it’s at a 20-year low.
Mr Thomas said while Australian cattle supplies were at such tighter levels, producers would be insulated from softer global beef markets.
“With Australian prices moving in a different direction to those globally, it becomes more likely that once Australian production does eventually increase, prices will realign with global trends,” Mr Thomas said.
Slaughter figures have also reflected the tight supplies of the adult cattle herd. Mr Thomas said expectations were for adult cattle slaughter to drop to 7.1 million head in 2016, down 21 per cent year-on-year, before falling a further 2pc to 6.9 million head in 2017.
“In short, a shock to the processing sector in 2016, a matter of managing the limited numbers available in 2017, before a small rise in 2018,” he said.
From a price perspective, the restockers dictated the direction of the market pushing indicators such as the Eastern Young Cattle Indicator (EYCI) to a record 725.75 cents a kilogram (carcase weight) in mid-August.
As the year progressed, agents reported a bigger proportion of EYCI-eligible cattle being in finished condition (bought by processors), rather than stores (bought by restockers).
This mean’t the prices for individual categories of stock didn’t really fall to any great extent, it was just that a bigger proportion of the processor type cattle made up the EYCI calculation.
Mr Thomas said the level the market would settle in the medium term (2018-2020) would be dictated by the global trade environment, currency shifts and the rate at which global demand increased.
“However, it’s unlikely Australian cattle prices will return to pre-2013 levels, but rather establish a new level – somewhere in between long-term averages and the current record highs,” he said.
