AS flagged in last week’s column, an unexplained mid-month surge in beef exports saw the result for the full month of October little different to the month before at 86,279 tonnes according to latest figures from Department of Agriculture and Water Resources (DAWR).
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The surprise in this comes from the apparent but unconfirmed reduction in the Queensland kill due to extensive wet weather throughout October.
Without the weekly slaughter figures normally supplied by MLA it is impossible to quantify the extent of lost production due to rain but anecdotal reports suggest central and south east Queensland plants have seen a big reduction in supply of grass cattle.
MLA last reported the Queensland kill for week ending September 22 at 66,000 head.
It is quite possible that wet weather may have taken 15pc off that number which could mean 10,000 fewer cattle per week.
There is no indication that Southern states have lifted their kills throughout October so the national (Eastern states) kill could well have been back by around 40,000 head for the month.
We are left to guess how beef exports for the month could therefore have held so well in these circumstances.
Certainly slaughter has been top heavy with feedlot cattle and average carcass weights would be up but this would not explain the difference.
The export tonnages reported by DAWR in the early part of October were well down which was consistent with a lower kill but then there was a sudden jump.
One explanation might be that there has been some accumulation of frozen stock occurring with the difficult trading circumstances in overseas markets and perhaps a bit of housekeeping may have occurred in the positioning of those stocks ahead of the run down to Christmas.
Rundown to year end
THE October volume brings progressive beef exports for the calendar year to 839,143 tonnes, just 2000t or 0.2pc behind same period last year.
That represents a big catch up from the mid-point of this year when exports trailed 2016 by more than 10pc.
The difference of course was last year’s wet winter which caused slaughter numbers to fall off in the third quarter and not start to pick up again until things had dried out toward the end of October.
This year was just the opposite with numbers holding unexpectedly strong throughout the third quarter and only starting to shorten stride with the arrival of October’s rain.
Last year supply remained strong from late October right through to normal Christmas closure as a consequence of the build-up of numbers in paddocks in the winter and early spring months.
But this year it looks as though the remaining months will reflect the numbers already sold between July and September resulting in beef production and export tonnage tapering off.
One major processor I spoke to earlier in the week confirmed that November was shaping no better than October for numbers and that is expected to be the situation for the remainder of the year.
As he said, the cattle are just not there and putting grids up will not alter the fact.
In consequence, over-the-hooks prices remain unchanged with ox at 495c/kg and cow at 440.
As tempting as it might seem under these circumstances to close early, that would seem unlikely due to contracted commitments.
The only real option is to continue to drop time and struggle through on 3-4 days a week.
However there is some positive balance to this in that those cattle in the paddocks now represent a good core of slaughter numbers in the summer months ahead.
In the last two months large parts of Central Queensland have transformed from dustbowl to oasis and the cattle that are there are going to do very well.
When the lights are turned off for a well-earned break, my estimate of the year-end position is that slaughterings will be 4-5pc lower than last year with exports at around 1.5pc lower.
Total shipped weight of beef exports could therefore fall just short or just over the 1 million tonnes mark.
Market challenges
DESPITE a very different month-on-month trading pattern this year, the US will end up taking pretty much the same volume of Australian product overall as it did last year.
Ten months year-to-date tonnage stands at 201,127 which is just 6700t or 3pc less than same period 2016.
The problem however for Australian exporters has been the falling value of lean beef in the US market as it readjusts from the extreme prices experienced in the early stages of herd rebuilding there toward a more normalised price trend line as greater kill numbers come forward.
Japan by contrast has taken more Australian product every month this year compared to 2016 and should end up at 290,000t or better for the full year compared to 264,000t last year.
But again difference between Australia and the US in production cycles and prices is a problem.
The extent of US price competitiveness in this premium market has meant little joy there for Australia regardless of the increased tonnages.
Despite triggering Japan’s safeguard volume for frozen product in late July and suffering a steep hike in tariff, US competitiveness in this market seems undiminished.
As evidence, their August tonnage to Japan increased by 14pc above their July figure despite tariff increasing from 38.5 to 50pc. Overall for the eight months to August 2017, US tonnage to Japan has increased by 29pc.
Korea is also something of a battle for Australian exporters and again the US is implicated by its ability to compete on price.
Australia shipped only 11,000t to Korea in October bringing progressive for the year to 120,600t, down 15pc on 2016.
Looking to next year it appears certain that the US will keep churning product out in increasing quantities into global markets that are critical to Australia and that will continue to hurt.
