UNPRECEDENTED premiums paid by restockers will be eroded as Australia's cattle herd rebuilds.
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Speaking at Meat and Livestock Australia’s Global Market Forum in Brisbane, market information manager Ben Thomas said Australia's cattle herd was set to increase from its low of 26 million head in 2016 to more than 28.5 million head in 2021.
The increased supply of cattle would push down prices for particularly young cattle, bringing Australian cattle prices back in line with US trends.
That would see values for yearling steers return to the 250-300c/kg live range.
“2016 was certainly the year of the restocker,” Mr Thomas said. “When we have a look at yearling steer prices through the saleyards we can see that restockers paid significantly higher prices than feeders and processors.
“At the end of last year that premium that restockers were paying was up to 50c/kg liveweight. But once we get a rebuilding in cattle numbers that zap really comes out of the restocking market.
“Already the prices being paid by restockers are now only at about a 17c a premium compared to what processors and feeders and feeders are paying.”
Mr Thomas said US and Australian cattle prices typically followed each other. US cattle values had increased more than 133pc, and Australia had followed, increasing about 100pc.
However, it took the US market about 15 months to drop 45pc to its current A350-400c/kg liveweight level.
“If Australian feeder steers were to follow a similar trend it is highly likely that the Australian market would back somewhere between 250-300c/kg liveweight by the time we have recovered to normal production trends.”
Mr Thomas said a low female slaughter rate and reasonable feed conditions across southern Australia in past six months or so was already resulting in herd growth. The national herd was likely to be just below 27 million head in the second half at the year, led by southern Australia, he said.
“We’re confident that there has been enough females retained at reasonable enough branding rates to see something of an increase in the Australian cattle herd in 2017,” Mr Thomas said.
However, the northern herd was not likely to return to its 10 year average size until 2021.
“That’s just how depleted the northern herd is,” Mr Thomas said.
