Shrinking supply pushes cattle prices up

Shrinking supply pushes cattle prices up

Beef
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Rebuilding plans being put in place.

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AS CATTLE prices continue to lift on the back of dwindling supply, producers appear sanguine amid pandemic beef demand uncertainty with consultants and lenders reporting rebuilding plans are being put in place across the country.

Good seasonal prospects is possibly the main driver but sitting at the back of minds would have to be the fact the low herd level will underpin the market for the next couple of years.

Following the latest cattle market projections from Meat & Livestock Australia pointing to cattle turnoff declining to its lowest point since the mid-1990s, leading analysts have forecast young cattle prices to hit average levels equal to the previous record set in 2016.

Rabobank believes the average annual Eastern Young Cattle Indicator will lift 30 per cent to be 632 cents per kilogram carcase weight in 2020.

Based on the last reported EYCI price of 741c/kg, this would mean prices would ease on the record peaks hit early this year when widespread rain created grass fever across many cattle producing regions and coronavirus disruption was still to set in.

The big agribank's latest beef outlook tipped Queensland to emerge as the colosseum of the Australian cattle recovery.

Senior analyst Angus Gildey-Baird said while breeding numbers in some areas of Queensland were as much as 75pc below normal, well-priced forced sales last year had assisted cash flow and provided a good base for recovery.

"While offloading last year was done reluctantly, the prices weren't at rock bottom levels," he said.

In previous cattle market cycles, the period going into the drought saw much higher inventory and a sell-off in a market without China and African swine fever.

"So we are starting this recovery from a higher base, although that doesn't necessarily mean a quicker recovery - it will still come down to an individual's ability to manage cash flow and whether they opt to aggressively build numbers or trade stock to maintain cash flow," Mr Gidley-Baird said.

Agents believe coronavirus will encourage a fair degree of conservative decision making on that point but agree there is an underlying confidence that Australian cattle prices will be well supported for the next 12 to 18 months.

That is delivering a continuation of restocker enthusiasm, despite high buy-in prices for young steers, they said.

MLA's national indicators show feeder steer prices have lifted from 351c/kg liveweight to 358c/kg in the past week and heavy steers from 306 to 314c.

Reduced cattle numbers on AuctionsPlus to the tune of 3365 last week saw demand increase, with clearance rates averaging 83 per cent, Holly Baker reported.

Recent widespread rainfall across many regions in southern and central NSW, Victoria and South Australia stimulated purchases, resulting in a dearer market trend across all stock categories, she reported.

The most significant was with pregnancy-tested-in-calf heifers, which averaged $1806.

With breeding numbers way down in central and northern NSW also, Victorian producers were well-positioned to capitalise on national restocking demand, with most areas, apart from east Gippsland, maintaining close-to-normal stocking levels, Mr Gidley-Baird said.

NSW and Queensland markets would also provide strong buyer interest for SA going forward, he said.

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