FOLLOWING on from May’s increased slaughter throughput, June has maintained national (eastern states) kills in excess of 130,000 head per week with the result that beef exports for the month have held their ground at 94,422 tonnes according to latest Department of Agriculture and Water Resources (DAWR) figures.
This brings the half-year total to 473,000t which is 11pc behind same period 2016.
The beef export result is closely in step with the national kill (compiled from MLA weekly reports) which is down by 10.9pc on 2016 on the progressive count to June 30.
However, going forward from this point may see some divergence from last year as the kill looks set to maintain its current momentum at least through July and possibly well into August.
Last year the kill dropped off in mid-July and did not pick up again until late October.
The expected seasonal decline last year was exacerbated by a very wet winter which does not appear to be on this year’s radar.
A seasonal decline is still expected this year but current indications suggest it may be limited to late August/September.
That will pull production back but what so far has been a very mild winter may mitigate that production loss through higher than expected carcass weights.
By October, oats cattle should be supplementing strong numbers continuing to flow from feedlots and second-round musters and preg testing should be delivering the final run of fat cows for the year.
On that basis, the current 11pc difference between this and last year could peg back to around 5-6pc which would see 960-970,000t exported for the year.
But this year’s gain might be next year’s loss.
From Central Queensland there are anecdotal reports suggesting a significant proportion of number 5’s (next year’s grass bullocks) have already been sold into feedlots.
If that is the case it would point to a sizeable hole in next year’s kill.
US favouring domestic supply
AUSTRALIAN cattle supply outlook in the months ahead as noted above is reflected in the latest US imported beef market report compiled by Steiner Consulting.
They make the point that increased availability appears to have added a touch more urgency on the part of Australian packers to get some product sold for forward time slots.
Whereas in the past there was some reluctance to sell for late August and September for fear of tight cattle supply, they claim that some of those fears now appear to have eased.
Steiner believes that increased supply level in Australia is the primary driver in the US imported beef market at the moment and that is what is behind the easing tendency.
While imported lean beef was trading at a premium to domestic lean in the lead up to the Memorial Day weekend (the biggest US beef consumption weekend in the year), that has now turned around.
In the first week of May, imported 90CL blended cow was quoted at US225c/lb (FOB US port) compared to 223c/lb for equivalent domestic product.
Two months later in the first week of July both imported and domestic product were on par at 233c.
But by the second week of July, domestic lean had strengthened to 234c and imported product had fallen to 229c.
Greater assurance of availability of US domestic product and an increased tendency toward the use of fresh beef at foodservice level are relevant factors.
The supply side of US domestic lean looks to be in good shape at the present time with cow/bull slaughter running at 10-11pc above year ago levels.
While the US now has several years of rebuilding its beef herd under its belt it is also the case that the dairy herd has been steadily increasing in size resulting in more cull dairy cows available for slaughter.
Grinding cuts and trim from the fed-cattle segment are also a large part of the supply side of US domestic lean and in that regard higher feedlot inventories of market-ready cattle expected in August and September are of relevance.
US fed-cattle prices are predicted to slide in August due to the expected higher numbers and the flow through of this in the domestic lean market can be expected to impact the imported beef market.
If the exchange rate continues to strengthen or even remain at its current high of 78c in parallel with this aggregation of emerging negative market sentiment for imported lean, it is shaping as a difficult time for Australian processors.
A squeeze on Australian cattle supply around late August/September will keep upward pressure on cattle prices here and force processors to hold out for more money in their offerings into the US market.
How well that might work remains to be seen.
Prices ease with strong supply
AS EXPECTED, last week’s national (eastern states) kill maintained the strong supply trend evident now since early May.
MLA’s market reporting service quoted 136,002 head, up 1pc on the previous week and up 3pc on same week last year.
New South Wales, Victoria and South Australia all recorded gains whereas Queensland numbers were marginally back on last week by just 800 head.
Queensland’s reduction was in male cattle which if anything simply reflects varying flow rate from week to week out of feedlots. Female numbers in Queensland were up slightly on the week before.
With the Queensland kill now well locked in for the rest of July and the first week of August it was no surprise to see rates come off a touch late last week.
In southern Queensland four tooth ox are now attracting 515c/kg and best heavy cow 450c.
Feeder cattle also look like coming under a bit of downward pressure with one major processor not quoting this week. With feed yards full and grain price trending upwards, heavy yearling steers might be expected to track south of the 320c mark where they have been recently.