Comment
BACK in mid-September, southern Queensland works had at least three weeks kill in front of them which meant that October, with 22 regular working days, was going to be a big month.
That has proven to be the case with latest Department of Agriculture figures showing 113,719 tonnes of beef exported for the month.
That represents an increase of 8000t or 8pc on previous month and almost 15,000t or 15pc on same month last year.
This makes October the second biggest monthly tonnage this year close behind the 115,000t recorded in July.
It also brings to seven the number of months that tonnage has exceeded 100,000t this year.
Not surprisingly progressive tonnage has already exceeded the 1million tonne mark with two months of the year still to run.
With this progressive count representing a 7.5pc increase on last year it is likely that the full year result will come in around 1.2m tonnes.
While all that is very good from the perspective of economic multiplier and flow-on effects, it does come at a price.
That price very obviously is the alarming diminution of the national herd through highly elevated female cattle slaughterings and the consequential shortage of slaughter cattle that will result in the months and years ahead.
In fact we may already be starting to feel the effects with September's three-week lead time suddenly shortening to just a week and over-the-hooks prices in southern and central Queensland spiking by 40c/kg DW ($140/head on a 350kg bullock) in the last weeks of October.
But what Australia is currently experiencing is just one part of an emerging worldwide beef supply shortage as MLA's US-based contract analyst, Steiner Consulting, summed up in their report last week.
"There is a fair amount of panic among beef buyers both in North America and Asia at this time.
"The dramatic shortfall in China meat protein supplies points to ever increasing demand in that market at a time when global supply growth is extremely limited.
There is a fair amount of panic among beef buyers both in North America and Asia at this time. The dramatic shortfall in China meat protein supplies points to ever increasing demand in that market at a time when global supply growth is extremely limited.
"Beef production in markets that currently supply China is vulnerable to weather events and government policies.
"Facing increasing risks to their supply chains, buyers have escalated their efforts to obtain coverage, reflected in recent price action."
In particular, Steiner notes the political and seasonal factors playing out in China's biggest supplier, Argentina, and third largest supplier, Uruguay.
Figures from China Customs to September this year show imports from Argentina at 217,000t, almost 100,000t or 83pc up on last year and surpassing previous market leader Brazil.
This came about as a result of liberalisation of Argentina's economy and removal of export controls by the Macri government in 2015 and a subsequent period of herd and production growth.
But the political landscape changed dramatically last Sunday with the defeat of Mr Macri and return of the populist Peronist party which has ruled Argentina for all but six of the past 30 years.
Because of their known support for interventionist and pro-worker policies, this Peronist leap to the left threatens a return to higher taxes and export controls.
At issue is the 40,000t/month China currently buys from Argentina and just what the alternatives are should that threat materialise.
Uruguay's situation is perhaps more pressing for China as it is a case of rapidly expanding exports at the same time that production is flat.
To September this year, China has progressively raised its Uruguayan beef imports to 193,000t which represents 65pc of that country's total beef exports.
However instead of the usual seasonal increase in slaughter levels in the last quarter, supply is diminishing because of good moisture levels and prospects of a strong market ahead.
Cow slaughter in the last month is 44pc lower than a year ago.
With the pressure this will place on domestic channels there is real concern over the amount of supply that will be available for shipment to China from Uruguay.
This uncertainty about South American supply outlook is seen as a likely reason why China will remain a strong influence in Australia and New Zealand, markets which traditionally are large volume suppliers into the US.
For most of this year market participants in the US have had to deal with the reduced volume of available frozen product in these markets brought about by China's buying activity.
But now it is really starting to bite.
It is suddenly all too apparent that China's unrelenting demand for beef is likely to be confronted by supply constraints in a number of its larger source countries.
In consequence, the level of concern in the US about supply availability in the first quarter next year has stepped up to the point that the price of frozen imported 90CL lean grinding beef is now escalating on a daily basis.
In the space of a week, Australian/NZ 90CL blended cow jumped US$16/cwt (100lbs) to US$265/cwt FOB US East Coast. That is a rise of US$76/cwt on last year.
If my maths is correct US$16/cwt equates to around AU$510/tonne and US$265/cwt to around AU$8450/tonne, an increase of more than AU$2400 on this time last year.
Good news it seems for those with fat cows to sell but also a portent for the processing sector that no amount of money will maintain cow supply once it rains.
Rain reduces cow offering
While the best of last week's rain in NSW was in the central/north of the state, there was sufficient in the south to markedly affect the weekly opening market at Wagga on Monday.
Recent yardings of around 1400 cows fell to under 600 with heavyweights just holding to a shade easier at an average of 253c/kg.
In southern and central Queensland supply of slaughter cattle has tightened to the point where works have only a week or so in front.
The central/southern Queensland freight differential has disappeared and grids remain on 600c/kg for 4-tooth ox and 500c for heavy cow following rises for the last two weeks.
