By Angus Brown | Source: MLA, ACA
While there seems to be plenty of store cattle for sale in January, with weaner sales seemingly coming up daily, the supply of finished cattle has been exceptionally low. So far in January slaughter levels have been at five year lows, and this week we take a look at what this might mean for supply, and price, down the track.
The first four weeks of 2017 have seen the cattle slaughter weaken considerably. According to Meat and Livestock Australia’s (MLA) weekly slaughter report, just 371,262 head of cattle have been slaughtered on the east coast. Slaughter has been 21% lower than the same four weeks in 2016, and 34% below the record of 2015.
January cattle slaughter hasn’t been this low since 2011, which produced the wettest of wet summers. Interestingly, in 2011 cattle slaughter rallied strongly in February, actually moving above the five year average (figure 1).
The tight slaughter has been across all states, with NSW and Queensland 17% below last year, and Victoria a very large 34% lower. The impact of the herd rebuild seems to have shifted strongly to the south.
Slaughter will be stronger in February. On the five year average, weekly cattle slaughter in February is 12% higher than the last two weeks of January. This would still only take slaughter to 115,000-120,000 head, still well behind last year.
Unusually for the cattle market, the impact of the weaker slaughter on price has been relatively predictable. As we know, young cattle prices have been driven by restockers, this is not the case for NSW Heavy Steers, which have spent January at 9.5% higher than in 2016, largely due to
Rising slaughter rates in February don’t tend to impact on the price of heavy steer too much. However, the high supply in February 2011 saw NSW heavy steer prices fall, but only marginally, at 10¢ lower than January.
In fact, it is very rare for heavy steer prices to fall significantly in February, or early March, with the 10¢ fall in 2011 being the largest decline in the last 10 years.
The good news is that heavy cattle prices don’t seem to react strongly to rising supply at this time of year, possibly due to demand ramping up. As such we don’t expect heavy steer prices to show much weakness, at least until we get further into autumn.
This year could be different however. The good season in the south appears to have seen cattle held back, or they weren’t there in the first place. If cattle have been held, there could be stronger than normal cattle supply, but if they weren’t there in the first place, prices are likely to tick sideways.
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