The Australian cattle industry will be influenced by a number of extreme forces in 2016.
From a cattle supply point of view, numbers over the coming two years will fall to levels not seen in more than twenty years.
This alone will more than likely stimulate strong competition between restockers, feedlots and processors for the limited availability.
The national herd is estimated to fall to 26.2 million head by 30 June 2016, before declining slightly again in 2017, to 25.9 million head.
If this occurs, it will represent a 3.4 million head, or 12%, fall since 2013 and become the lowest national herd for 24 years (1993).
On the demand front, an interesting dynamic is expected to occur between the proportion of cattle exported live and those processed.
Typically, the live export contribution is 9% of turn-off, but for 2015, this is estimated to have jumped to 12%. This trend is expected to continue in 2016, increasing the competition for cattle, particularly in the far northern regions of the country.
Beef and veal exports are expected to fall as a result of lower production, not due to waning demand.
The prediction of the A$ to average between 66-69US¢ is a significant positive, but needs to be balanced against the heightened competition from Brazil in many markets, the expectation of high US poultry and pork production, higher year-on-year US beef production and significantly weaker US beef markets compared to 12 months ago.
Nevertheless, on balance, the Australian cattle market will be in a good position in 2016, with any further summer rainfall only acting as a catalyst for additional potential cattle price rises.
The key areas to closely monitor will be the footprint Brazil creates in China, developments in the US beef market, and just how tight Australian cattle supplies become at various times through the year.
http://www.mla.com.au/Prices-markets/Market-news/MLA’s-2016-Cattle-Industry-Projections-released-28012016