THE RAIN-INDUCED cattle price gains that this month took the benchmark indicator to its highest point for the year are starting to ease, with conditions finally settling in conducive to 2018 forecasts for a lower level.
Cattle market experts say prices are under downward pressure this week on account of hotter, dry weather and the waning demand at the finished end of the supply chain.
US cattle prices are still headed south, although the Australian dollar’s dive has done plenty to offset that so far, according to Commonwealth Bank agri analysts.
The Eastern Young Cattle Indicator, which hit a 2018 record of 566.75 cents per kilogram carcase weight two weeks ago following tightened supply with good rain across much of Queensland and north-east NSW, has now dropped back 8c.
Strong competition in overseas market has consistently been put forward by cattle market forecasters as underpinning a new lower market level this financial year and next.
Senior economists at the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) have 2018/19 cattle prices at 439c/kg, down 4pc on this financial year, which itself will be a 15pc fall.
Livestock’s stellar run may have come to an end but both cattle and lamb prices would remain above five and ten year averages over the medium term, ABARES’ Jack Mullumby said.
His key message delivered at this year’s big ABARES Outlook conference in Canberra: Value creation will need to remain a priority.
Weak demand was on the horizon in many importing countries, for a variety of reasons, but of particular note was the United States which was currently Australia’s most valuable for beef and lamb exports, he said.
Feed costs will remain low, providing the US with incentive to maintain a high rate of feedlot turnoff.
“This means weaker import demand and downward pressure on Australian import prices,” Mr Mullumby said.
“We are also expecting weaker import demand for sheepmeat because the US flock is stabilising, exacerbated by the negative effect of recent changes to US immigration policies.”
There is widespread agreement expansion in US beef production will continue to put pressure on Australian exports in other markets, particularly Japan and Korea.
ABARES believes this year Australia will account for around 50pc of Japanese and Korean imports, down from 75pc in the early 2000s when disease issues disrupted the trade status quo.
Expanding US exports over the medium term are likely to continue to reduce Australia’s share in these markets and will come at a time when Japan and Korea’s own production is expected to expand, according to Mr Mullumby.
However, our livestock prices will receive some support from China where income growth continues to drive demand and meat consumption.
Real incomes in China have effectively doubled since the global financial crisis hit in 2007, driving per person meat consumption up by around a quarter, Mr Mullumby reported.
China was now the largest market for beef and sheepmeat in the world, he said.
However, Australia will face increased competition from rapidly expanding local production and other producers - with lamb, namely New Zealand and with beef the multitude of already established players.
At home, ABARES believes income growth will drive Australian meat consumption back above 110kg per person but says most of that growth will come from chicken and pig meat as consumers continue to show a preference for low cost and versatile foods.
By 2023, ABARES expects chicken meat to account for 50pc of Australian meat consumption and pig meat a further 25pc.
By then, beef and sheepmeat consumption will have reached record lows.
On the supply side, producers would continue to expand livestock inventories assuming favourable seasons, Mr Mullumby said.
“However, the rate of expansion will be slow as good prices provide incentive for a high rate of turnoff,” he said.
“If our meat and livestock industries are to remain competitive in this increasingly challenging environment, Australia must continue to make value creation a priority.”
That would involve improved relationships between suppliers and customers and communication channels between all participants in the supply chain, he said.