ABS data corrects kill details

While loss of monthly reporting and the seven-week delay from end of the quarter to publication date leaves a lot to be desired in terms of data quality and timeliness, there is still useful information to be gleaned from the figures.

If we accept ABS data as accurate and complete, it provides a correction factor which can be applied to other information sources such as the MLA weekly slaughter figures.

As previously commented on, the MLA service is based on voluntary contributions from meatworks. Not all choose to supply their figures and a recent long-run comparison put the difference between MLA and ABS at 20 per cent. That is to say MLA figures were found to consistently understate national weekly slaughter by 20pc.

The same commentator who conducted that analysis revealed last week that the error factor in Q1 2024 figures is 18pc. That means this year's highest weekly kill reported at 136,945 for week-ending May 3, was likely in excess of 160,000 head.

From a producer viewpoint, this tells us something about where slaughter capacity is currently at.

In 2019 when total slaughter for the year reached 8.4 million head (the highest in the past eight years), average weekly slaughter in Q2 that year was 162,500 head. In Q3, the average stepped up to 171,500.

Drought in 2019 was behind the escalation in slaughterings. But despite there being 750,000 extra cows killed in 2019 compared to the year before, capacity was not overwhelmed by supply. Had it been, the price of cattle would have fallen dramatically, but this was not the case. The year opened at 460c/kg for heavy cow in southern Queensland, momentarily fell to 380c/kg in March but was back up to 440c/kg in April. By July it was 460c/kg, surging to 500c/kg in October, 520c/kg in November before ending at 480c/kg under a late rush.

This year there will also be a surge of cows, but for the opposite reason to drought. Widespread rain in the Northern Territory has held up stock movement with Lisa Dyer at the Sturt Plains spelling facility 360km south of Katherine commenting how quiet it has been up to now. The big mobs are just starting to line up and they will take the place of local cattle that have recently kept the female kill in southern states at an unusually high level.

In 2019, second shifts and Saturdays were common but that changed with the wet, herd-rebuild years that followed. Supply tightened and COVID played havoc with labour, causing plants to drop time. Dinmore reluctantly pulled its second shift in September 2020.

But that has now turned around with rebuilding of shifts and new and refurbished plants coming online with the result of a trend potentially back to 2019 capacity level or better.

If the current level of 160,000 head per week (less wet weather and holiday downtime) can be maintained, the remaining quarters should be somewhere near 2 million head per quarter. That would see MLA's slaughter prediction of 7.85 million for this year achieved.

But should there be more cattle than that in the pipeline, the extent to which capacity has been rebuilt will determine any supply/capacity imbalance. Producers should be aware of the possibility of bottlenecks in the months ahead.

IT has been a long time coming but MLA has finally found a way forward from the well-intentioned but clumsily constructed Eastern Young Cattle Indicator.

Called the National Young Cattle Indicator, the new statistic focuses purely on restocker activity, with data drawn from both saleyard and online selling systems.

The definition is simple in that it captures any vealer, weaner or yearling over 200kg where the buyer is identified as a restocker rather than a feeder or processor. Appropriately, it will be reported in cents/kg liveweight.

The EYCI, by contrast, is calculated entirely from saleyard transactions. With its definition limited to vealers and yearlings over 200kg, grade score C2 and C3 and reported in cents/kg carcase weight, it was clearly intended to primarily reflect the domestic trade market when first developed in the late 1990s. As such it became the basis of the MLA/SFE Cattle Futures contract, which was listed in August 2002 on the then Sydney Futures Exchange (now ASX) but subsequently delisted in 2009 due to lack of interest.

Structural changes in the industry such as MSA and brand programs saw fewer slaughter types going through saleyards and a commensurate rise in young store cattle numbers. However, the National Livestock Language, which was developed in the early 1980s for reporting slaughter cattle in saleyards, failed to move with the times.

Without an appropriate descriptive language to differentiate quality and price in these store cattle, market reporters had no option other than to use slaughter-cattle fat scores as de facto quality indicators. Irrespective of actual fat level, this pulled the vast bulk of young store cattle in saleyards into the EYCI ambit. By default, the EYCI became primarily a mixture of restocker and feeder types with a small percentage of domestic trade descriptions all rolled together and reported in slaughter cattle language of cents/kg carcase weight.

In combination with existing feeder indicators the NYCI should result in better representation of the store cattle market and allow the EYCI to retire from service.

Latest news from the United States is a further decline in the price of imported frozen lean. Steiner quoted 90CL 3cents/lb down last week at US282c/lb FOB East Coast, but this is still a very acceptable 24c/lb above the same time last year. Fresh domestic lean, however, moved up by 3c to US349c/lb widening the spread between fresh and frozen towards 70c. Steiner makes the point that not all users of fresh domestic can substitute imported frozen so there will always be buyers for fresh. Therefore, as the supply of fresh lean declines, the spread between domestic and imported will tend to widen.