Slaughter increase drives beef exports to new high

Slaughterings exceeded 132,000 in the third week of October, the highest point for the year thus far. Weeks two and four were over 130,000 and week one would also have been up there except for a widespread public holiday.

Worsening dry weather and an unfavourable El Nino outlook were fuelling the supply pipeline which pretty much had the rest of the year covered for some processors and space bookings being taken for the New Year.

Interestingly the increase in slaughterings is not due to any discernible trend toward proportionally more females in the mix.

Like September, the pattern in October was for just one week where females rose to 47 per cent of the kill with the remainder of the month ranging from 43 to 45pc.

This is confirmed in MLA figures which show a remarkably stable kill pattern across the states.

On present trend the national kill will exceed 7 million head this year, a figure last seen in 2020. The difference is that 2020 was coming off the torrid 2019 drought kill of 8.5 million head when females averaged 56pc for the whole year. The carry-over into 2020 saw a substantial drop in the female kill but still an average of 52.5pc for the year.

In contrast, 2023 comes at the end of a three-year rebuild phase with just the beginning of a descent (albeit rapid) into dry times.

That could be likened to 2013 after the 2010-2012 three-year La Nina event.

Then, the female proportion ran at 43-47pc while the national kill escalated from 7.3 to 8.3 million.

This suggests that increase in herd size from the recent rebuild years can be expected to influence the slaughter mix and therefore average carcase weight and beef export tonnage for some time yet.

The 105,000 tonnes of beef exports reported by the Department of Agriculture is a new four-year high point last bettered in 2019. It is up a whopping 32,000t in the same month last year and takes the progressive total for this year to 881,880t, a 24pc increase on 2022.

This means total beef exports for the full year will push towards 1.1 million tonnes.

The lead market (by volume) for Australian beef at present is the United States. With a progressive volume of 190,753t, it represents almost 22pc of Australia's total beef exports.

Since May this year the US has been on the march, taking progressively higher monthly tonnages to the point that it is now 77pc ahead of 2022.

Its October volume of 27,612t was double the same month last year and November and December need only hold similar volumes to October for the entire final quarter to be double that of last year.

How quickly the US market has grown is evidenced by the fact that as recently as July it sat in third place behind Japan and China. In August it leapfrogged both to take the number one slot.

But whether there is more upside in volume to follow in the first quarter next year remains to be seen.

Increased demand for imported product would normally be associated with reduced domestic supply of equivalent product. To some extent that appears to be happening as the recent years of drought-induced herd liquidation in the US transition to rebuild phase.

But the process seems to be a bit lumpy in its rollout as US domestic cow/bull slaughter is still very high; currently around the same level as 2021 according to US analyst, Steiner. US Drought Monitor confirms significant areas of the country are still experiencing moderate to exceptional drought.

This suggests there is still enough domestic lean in the system to exert downward pressure on the price of imported lean and that may continue to be the case while the drought persists.

Domestic fat trim is another consideration because of its symbiotic relationship with imported frozen lean beef. Currently it is at its lowest price level for the year and accumulating in inventory but not because of oversupply of fed cattle. Rather, Steiner suggests it could be reflective of a slowdown in domestic ground beef sales and as such a further negative for imported beef.

Import supply availability is the other consideration for US buyers and in that regard, they would appear to have little to be concerned about in the medium term.

Australia and New Zealand appear likely to maintain elevated production in the New Year and South America will also be prominent with both new shipments and product released from bonded storage.

For Australian processors it may well be a case of the more product they offer into the US, the cheaper it will get.

SHOWERS and storms mostly in the southern part of Queensland were a blessing for those areas affected by fires but were mostly insufficient to affect movement of cattle.

Processors contacted said there was minimal disruption to their kill schedules.

For some works that are taking unpriced space bookings, the remainder of this year and a fair slice of January is covered but as the operator commented, general rain would pull a lot of that out. There are still slots to be committed with priced cattle before the end of the year, but operators are confident those cattle will be found.

Grid rates generally have not changed with YP ox attracting 440c/kg and heavy cow 355-360c.

International sales managers who attended the Anuga food trade fair in Germany have now returned home but not with much in the way of exciting new prospects. More of the same seems to be the outlook.

Meanwhile one major exporter confirmed that they are taking a lot less money for trim in the US market and the recent upward movement in the dollar to 65c has added a 15c hit to break even.