National beef herd falls to lowest levels since 1990s

Heifers-cootamundra

Seasonal conditions will most likely have the strongest impact on domestic cattle prices, however, exchange rates, production in the United States and South America, market access developments and demand from China will all play an important part.

Australia’s national beef cattle herd is expected to fall to its lowest level since the mid-1990s as ongoing dry conditions persist across many key cattle production areas, according to Meat & Livestock Australia’s (MLA) 2019 Cattle Industry Projections.

Cattle slaughter is forecast to drop 3% to 7.6 million head in 2019, based on the continued reduction in the size of the breeding herd and potential pool of available finished cattle.

In line with the forecast decrease in slaughter, total beef production is projected to decline 4%, to 2.2 million tonnes carcase weight (cwt) in 2019.

MLA’s Market Intelligence Manager, Scott Tolmie, said drought conditions that have swept across New South Wales and south-west Queensland have undone much of the herd rebuild achieved since the 2013 – 2015 drought.

“As a result of elevated slaughter and substantially lower than usual branding rates, particularly across Queensland and New South Wales, the national herd is expected to decrease a further 3.8% to 26.2 million head by mid-2019. A significant turnaround in conditions is needed before rebuilding can recommence,” Mr Tolmie said.

“The prospect of another below average northern wet season and a largely negative three-month rainfall outlook will likely mean many producers that retained stock in 2018 will continue or commence destocking in the months ahead.

“Compared to last year, many producers have entered 2019 with depleted feed stockpiles and require a turn-around in seasonal conditions to avoid mounting feed costs.

“Carcase weights are expected to drop to an average 289kg/head this year as the female kill remains elevated and the ability and cost to finish cattle remains challenging.

“The number of cattle on feed is expected to ease from the record levels reached in 2018 to around one million head, on average, in 2019.”

Looking at prices, Mr Tolmie said any further destocking will see downward pressure on cattle prices, particularly for store condition cattle.

“Finished cattle will likely remain supported to some degree, given the tight supply of quality slaughter cattle and strong demand fundamentals in many markets,” Mr Tolmie said.

“If there is a major improvement in seasonal conditions across eastern Australia, supplies will tighten sharply and fierce restocker competition may re-emerge, as was the case in 2016.

“Seasonal conditions will most likely have the strongest impact on domestic cattle prices, however, exchange rates, production in the United States and South America, market access developments and demand from China will all play an important part.

“Australian beef exports ended 2018 at 1.13 million tonnes shipped weight (swt), the third largest year on record and the sixth consecutive year exceeding one million tonnes.

https://www.mla.com.au/news-and-events/industry-news/national-herd-contracts-as-dry-conditions-continue/

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