Friday, March 29, 2024

PULSE: Low Australian beef production

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Total Australian Eastern states cattle slaughter for July was 477,771 head.  This was down by 20% or 120,000 head compared to the same period last year, as farmers continue to retain stock due to improved feed and weather conditions.
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This decline was largely driven by a reduction in female cattle slaughter, with July rates in Queensland and New South Wales (NSW) falling by 27% or 64,691 head.

Although, worryingly, the female cattle slaughter ratio remains above the 47% threshold. 

This is due to enticing domestic and sale yard prices from competing processors and restocker demand, thereby not supporting sustainable herd rebuilding. 

As a result of declining beef production, Australian beef exports in July fell by 23% year-on-year to 88,786 tonnes.

Unsurprisingly, a large portion of this came from reduced volumes to China, down 4,400t on June levels. 

The increasing rate of covid-19 through Victoria and parts of NSW is preventing some processing plants from exporting to China, which has compounded with other factors such as lower demand in general and higher tariffs to this destination.

Beef exports to the US were on par with year-ago levels with 23,672t, due to good demand from the retail sector. 

The lower supply of beef in Australia looks like it will continue for some time. 

Large beef plants are opting to close for maintenance as they struggle to acquire adequate daily kills. This is purely a flow on impact of the drought conditions through 2018-19 that failed to allow farmers to actively rebuild cattle numbers.

The ongoing lack of supply and therefore lower export volumes helps to reduce competition for New Zealand beef into key markets. As it is currently our off-season this may become more evident as we get further into spring Australian demand for NZ beef has also picked up but largely flown under the radar in recent months. 

Exports of NZ manufacturing beef to Australia in the two-month period of June and July lifted to a combined total of 1525t; this is 500% (1271t) more than the same two-month period last year and just 179t short of the previous 12 months combined.

Australian lamb exports in July tracked along a similar path to June. 

At 18,432t, this was 195t and 382t above year-ago levels and the five-year average respectively. Exports to the Middle East lifted very slightly but remained 16% (664t) below year-ago levels. Product to China was also a little softer, down 4% (228t) month-on-month, which has decreased their market share to 29%, down from 33% in June. 

The US has helped to absorb this volume, up 4% (165t) month-on-month to lift the market share to 25%, quickly closing the gap between China as the current leader.

With covid-19 rampaging through Victoria, meat processors were ordered to cut staffing levels by a third for six weeks. This is significant as Victoria typically slaughters 150,000-170,000 lambs per week at this time of the year.

While the full impact of this is unknown, this will disrupt exports to some degree, adding to an already lower than normal supply. 

This may mean less competition for NZ lamb in the short-term.

However, if the kill is delayed and coincides with NZ’s peak spring production, this may swamp export markets and put added pressure on prices for both countries.

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