MLA cattle projections: Industry outlook shows price decline this year

JAMIE-LEE OLDFIELD, The Weekly Times January 22, 2017

THE Australian beef cattle market is likely to follow in the footsteps of the US, with a period of price decline to follow record highs experienced in the past two years.

With the cattle herd to increase for the first time in three years, and a much smaller decline of slaughter numbers in 2017, young cattle prices are likely to come under pressure.

But prices won’t fall all the way back, likely finding a new floor still above the five year average price.

This is according to Meat and Livestock Australia market information manager Ben Thomas, who released his Australian cattle industry projections for 2017 today.

Restockers paying an average of 26c/kg premium for yearling steers over lotfeeders, and 31c/kg above processors, has meant the Australian cattle market is “out of kilter” with international prices, according to the report.

And in terms of prices, the Australian market is following a similar pattern to the US, just one to two years later.

The projections show the eastern states feeder steer indicator has followed the US CME feeder cattle index very closely, just two years later.

In the US, the index peaked at 133 per cent above the five year average in 25 months, before declining to bottom out 45 per cent lower than that peak 15 months later.

The eastern states indicator in Australia doubled in 21 months, and MLA predicts it to follow the US falls, but not to the same extent.

“Providing some solace for Australian producers is the fact that the US market appears to have stabilised and at the close of 2016 was still 38 per cent above the aforementioned five year average price (281Ac/kg liveweight),” the report said.

“If the same scenario were replicated in Australia and taking into account global beef production, demand cattle/beef prices forecasts; an expected fall in the A$ and ongoing tariff reductions; the Australian cattle market could potentially decline 20 to 40 per cent from its peaks once production eventually rebuilds, but like the US, stabilise above the previous long term average.”

In terms of demand for Australian beef, exports are likely to ease another 5 per cent this year, while per capita consumption in Australia is expected to rise for the first time in a number of years.

“Overall, while Australian beef exports are forecast to decline for the third consecutive year, they will in fact still be the fifth largest export year for Australia,” the MLA projections said.

 “Beef consumption in Australia is likely to stabilise in 2017, as a result of softer international demand, combined with an expectation of consumers no longer having to face further rises in retail prices.

“Nationally, domestic utilisation is forecast to be 635,800 tonnes carcass weight, up 2 per cent from the previous year, resulting in the volume consumed on a per capita basis edging up to 25.9kg.”