Subdued second-half trade outlook

Subdued second-half trade outlook

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COMPETITION: Global trade prospects in the second half of the year are not exactly off to a flying start.

COMPETITION: Global trade prospects in the second half of the year are not exactly off to a flying start.

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Ken Wilcock notes that Australia can expect strong competition from the US in premium Asian markets.

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WITH the first half of the year behind us thoughts are now turning to what the rest of 2020 has in store.

Coronavirus will no doubt continue to impact the beef industry in the months ahead as second-wave infection lies in wait for the first signs of human complacency but at least the authorities now have some experience in what they are dealing with.

Whether recurrence of lockdown, as is currently happening in California, will spread throughout the United States remains to be seen but even if the pattern repeats to a significant extent it would seem likely that flow on effects will be less problematic.

High absenteeism, which dramatically drove down production in beef plants and caused wholesale prices to soar to record levels in the US, seems less likely second time around.

Rather, the US looks set to carry through into the second half with a processing sector at or near normal levels and a more than ample supply of fed beef due to higher carcase weights from the backlog of finished cattle.

Lean beef supply is also well placed as deteriorating seasonal conditions in the Southern Plains push up slaughter rates of beef cows.

In consequence Australia can expect strong competition from the US in premium Asian markets while at the same time facing restrained interest from US importers for lean grinding beef out at least to September/October delivery as noted in Steiner's latest update.

China meanwhile, as well as suspending plants in Australia and requesting restraint in trade from virus affected plants in Brazil and Argentina, has invoked seemingly pointless import testing for presence of the virus on product.

In the current Australian environment of tight supply, taking some players out of the game might be to the competitive advantage of those remaining but any benefit accruing would seem fleeting in the face of bottleneck port delays caused by the testing.

With the quality of the feed and rate of gain being achieved, the older steers, store cows and turnover cows and calves that went south in the early part of the year should be starting to look pretty good by now.

These factors considered, global trade prospects in the second half of the year are not exactly off to a flying start.

On the supply side, things look a little brighter with the likelihood of NSW and Victorian crop and pasture cattle starting to run in the next couple of months leading to a significant improvement in slaughter numbers in the final quarter.

Richmond North Queensland agent Matthew Kennedy said large numbers of cattle had moved from the north in the first six months but it had noticeably dropped off by mid-June.

Much of the offload came from Downs country which had suffered a disappointing wet season after the rain and flooding events a year earlier.

Empties from first-round musters have largely gone, with a few held back pending decision whether to hold or sell.

But as well as this traditional flow of meatworks cattle, vast numbers of feeders, stores, PTIC cows and cows and calves have also been offloaded.

Back from a recent trip, Matthew said some of the oats crops in NSW are just unbelievable and the western clover country will run a lot of cattle and put weight on until October.

Not surprisingly it is southern interest that has been driving the market with 95 per cent of these northern sales travelling more than 1000km to their destinations.

Interestingly this has meant thousands of Brahman cattle going down into NSW.

This includes a lot of straight, grey Brahman steers over 300kg, the type normally favoured for the northern live-export trade.

It seems when confronted with paying 400-plus c/kg for a crossbred steer, the prospect of a Brahman for 300-350c/kg looked more appealing to the southern buyers.

At the time, live export was in the order of 260c/kg so an appealing proposition from the seller's perspective as well.

With the quality of the feed and rate of gain being achieved, the older steers, store cows and turnover cows and calves that went south in the early part of the year should be starting to look pretty good by now.

One major processor confirmed that inquiries had started to emerge for these cattle and the expectation is that they will start to run in the next couple of months.

By October/November, the lead of the vast numbers of younger cattle that went south should also be looking pretty good and add some substance to kill numbers in the run-up to Christmas.

Alternatively, the Brahmans might represent a pool of live export slaughter steers if the money is good enough to haul them back to northern shipping ports as happened several years ago.

More Victorian abattoirs affected by coronavirus

FOLLOWING the Cedar Meats, JBS Brooklyn, Somerville Meats Tottenham and Pacific Meats Thomastown closures, a further COVID-19 cluster has emerged at Australian Lamb Company's Colac abattoir and Warrnambool multi-species operator Midfield has chosen to halt processing as a precautionary measure.

In a statement released on Monday, Midfield general manager Dean McKenna said the decision to stop operating was made on Sunday after the Health Department informed them that a meat inspector who is a close contact of people caught up in the Colac cluster developed symptoms late last week and tested positive to COVID-19 on Sunday.

He visited Midfield's Warrnambool plant last Tuesday.

Mr McKenna said, "We are erring on the extreme side of caution here. There is nobody at Midfield with symptoms; we have taken this proactive action as we take our corporate and social responsibility very seriously."

He was hopeful operations would resume later this week if testing results permit.

Meanwhile early sales this week continued to reflect a general shortage of numbers.

Pakenham yarded a total of 900 which yielded just over 200 cows.

Wagga numbers remained subdued at 2980 with 440 cows and Tamworth offered 1040 with 220 cows, mostly stores.

Grid rates in southern Qld came off late last week by as much as 20c for ox while cow rates were either unchanged or 10c easier.

The majors are now offering 630-640c for 4-tooth ox and 560-570c for heavy cow.

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