FOLLOWING on from January's hot start, slaughterings and beef exports stepped up even further in February to a level often associated with drought liquidation turnoff years. But contrary to the commentary in the United States Department of Agriculture's recent World Markets and Trade Report, Australia is not currently in a herd liquidation phase.
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Rather it has likely reached the end of an extended rebuild phase and is paused while producers in the south and north assess their feed resources against stocking levels for the winter months ahead. Meat & Livestock Australia's weekly slaughter survey figures support this view with female slaughter rate (FSR) hovering around 46-47 per cent.
February export volume amounted to 93,834 tonnes across all destinations.
That is 23,000t more than the same time last year and coupled with January, takes the year-to-date comparison to 47,000t or 39pc higher than last year.
To further illustrate the significance of this year's February figure, the same month in 2021 at the start of the rebuild phase saw an export volume of just 66,000t followed by 59,000t in 2022. As well, it needs to be remembered that processing capacity was adversely impacted by COVID at that time.
In contrast, the bad drought of 2019 saw FSR rise to 54pc in February of that year leading to an export volume of 95,000t.
Clearly herd reduction is not a causal factor in the current supply picture but successive years or herd rebuilding most likely is.
While there are differing opinions as to the extent of the increase in herd size, there would seem little doubt that the stage has now been reached where increased numbers of slaughter-weight cattle are appearing in consequence of the rebuild.
At the same time, processors have worked hard to recruit and train new people to rebuild slaughter capacity. This coalescence of cattle and labour is re-energising the processing landscape.
Throughput per shift is returning to optimal levels, second shifts that were reluctantly abandoned some years ago are being reinstated and new and refurbished sites are coming into play.
While not reflecting the entirety of the national kill, MLA's weekly slaughter survey figures show the gains being made.
By the third week of February this year, MLA was reporting 128,000 head. Last year it took until the last week in September to reach that level and in 2022 the closest it got was 107,000 head.
If the growth that is apparent in these early figures for 2024 continues throughout the year, it could mean by the final quarter, MLA will be reporting 150,000 head per week.
Looking at individual market destinations, Japan took the lead away from the US in February with 23,794t for the month.
There have been many times in the past 12 years that February has seen similar volumes but, on all occasions, it has coincided with yearly volumes to Japan in the high 200s to over 300,000t. Correspondingly, in the years when February volume was relatively low at around 16-17,000t, yearly volumes were in the low to mid 200s.
Perhaps this is an early indication that volume to Japan is set to rise significantly from its 20-plus year low of 206,000t last year.
One export contact, who attended a supermarket exhibition in Japan in mid-February, reported a resurgence of interest in Australian beef. He said there was a realisation that the US was shortening up and they will have to come back to Australia for the product they want.
But unfortunately, there is no sign of any economic improvement and no solution to the vexing problem of an ageing population.
Young people in Japan appear more interested in career than family with the consequence that birth rate is very low. Coupled with its dislike for immigration, Japan has a very real problem with the fundamentals that underpin a growing economy.
The US, meanwhile, recorded 21,341t for February.
This is a strong 10,000t increase on the same month last year and coupled with a similarly strong January result, the US position year-to-date is 21,000t or 101pc up on last year.
Low beef and dairy cow slaughter rates in the US are keeping a tight grip on supply of domestic lean and maintaining upward pressure on price.
Steiner reported a new record price of US323c/lb last week for domestic 90CL and this in turn is helping to keep upward pressure on the price of imported lean. Aust/NZ 90CL FOB US East Coast jumped 5c/lb last week to US270c/lb.
Brazil's dominance of the 'Other Countries' tariff-rate quota of 65,005t has seen that quota filled and out-of-quota shipments to the US now attracting duty of 26.4pc. Whether Brazil will continue as a volume supplier to the US market for the remainder of this year would seem to hinge on the strength of demand for its product from China and the extent of any further upside in price that would help to offset the US out-of-quota duty.
Early March shipment figures from the Department of Agriculture suggest Australia is on track for a volume of around 30,000t to the US this month.
Like Japan, China too has a low birth rate and population decline adding to its economic issues but for the moment, Australian beef exports remain on the up.
February shipments amounted to 15,757t, 3000t up on the same time last year and 29pc up year-to-date.
Korea's February tonnage of 13,869 contained no surprises as it was virtually identical to previous year.
Big price hits on increased supply
WITH wet weather effects cleared, the supply tap has opened up and prices are taking some big hits, particularly in the south.
At Wagga on Monday, domestic feeders dropped 68c to average 291c/kg, heavy feeders dropped 43c to average 302c while heavy cows lost 40c to average 216c and bullocks came off by 28c to average 276c.
In south east Queensland, indicative grid rates are 540c for YP ox and 480c for heavy cow but one of the majors withdrew from quoting on Tuesday.
For processors, the short weeks ahead are adding to the challenge of getting the cattle killed.
