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Tuesday, October 04, 2016

Herd rebuild is focused in QLD

By Angus Brown  |  Source: NLRS, ABS

Key points

  • The ABS official herd numbers were released recently, showing the extent of flock liquidation in Queensland, and built in WA.
  • The herd rebuild is occurring across the eastern states, with Queensland the most to make up.
  • Continued good conditions will be required in most of Queensland to maintain extreme prices.

2016-10-04 Cattle Fig 1

2016-10-04 Cattle Fig 2

 

The Australian Bureau of Statistics (ABS) have recently released their official number for the size of the Australian cattle herd as of the 30th June 2015. Along with national and state numbers, the ABS collate cattle numbers by National Resource Management (NRM) region, which can tell us a bit about which areas might be driving the herd rebuild.

The ABS have pegged the official cattle Australian Cattle at the end of June 2015 at 27.4 million head.  This number was just a five year low, with 2010 being around 900,000 head lower.  MLA are forecasting the June 30 total herd to 26.142 million head, which would be 400,000 head lower than the 2010 figure (figure 1).  The 26.1 million head forecast will also be the lowest herd level since 1996. 

Herd declines have not been uniform across the states, as can be seen in figure 1.  Queensland obviously has a strong impact on, still accounting for 41% of the National herd in 2015.  It was Queensland which had the heaviest fall in its herd from the peak in 2013 to 2015, losing 11%, or 1.45 million head. 

When we consider that the fall in the national herd was just 1.9 million head, or 6.4%, it’s clear that Queensland drove the destocking.  Herd movements in other states were rather inconsequential.  WA added a healthy 18% on the back of better conditions and strong prices, but this accounts for just 362,728 head. 

NSW offset the WA herd increase by falling 6% (354,836) and SA and Vic largely cancelled each other out, despite the percentage loss in SA being much larger due to a smaller herd. 

It’s interesting that prices are so strong in southern states currently, despite the smaller declines in the herd, which means supply shouldn’t be that much weaker, but demand has obviously been very strong.

In the remote market of WA, the leading prices of 2015, and the lagging prices of 2016 are partially explained by herd numbers.  There is likely to be little rebuilding in the West currently, hence prices remain at export parity, rather than at the premium seen on the east coast.

Figure 3 (and MLA’s map) gives an idea of where in Australia, and Queensland in particular, the cattle are situated.  The Fitzroy region, centred on Rockhampton, has by far the most cattle, with nearly 3 million head.  The next three largest regions are also the largest by area, being the Northern Territory, Desert Channels in Queensland and Rangelands of WA. 

No doubt restocking in the Fitzroy and Desert Channels regions are helping drive prices in the current market.

What does this mean?

Looking at the location of the herd shows just how much impact Queensland can have on cattle markets.  It’s true that most parts of Victoria and southern NSW have endured a couple of dry springs in a row, but with just one of the top 10 cattle regions (Glenelg Hopkins) in this area, local restocking demand would be not be driving the market like the thirst for stock in Queensland.

It has been well identified that cattle markets are currently overpriced across the eastern states, and this is in large part due to an abnormally wet winter in Queensland.  For extreme values to continue we’ll want to see continued rain in the north, to maintain restocker demand. 

Mecardo information is provided to assist in your marketing decisions. It contains a range of data and views on the current market. It is not intended to constitute advice for a specific purpose. Before taking any action in relation to information contained within this report, you should seek advice from a qualified professional. The information is obtained from a variety of sources and neither Mecardo nor Ag Concepts Advisory will be held liable for any loss or damage whatsoever that may arise from the use of information or for any error or mis-statement contained in this report. 

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