By Angus Brown | Source: MLA's NLRS
Anyone concerned about rising cattle prices eating into processors’ profits will be pleased to see that cattle slaughter continues to run at record levels. Higher prices are simply required to keep cattle flowing, as it would appear killing cattle and selling beef remains profitable.
If cattle were getting too expensive, it’s likely we would have seen cattle slaughter fall over the last 6-8 weeks since prices hit two-year highs. Instead of seeing a trend like in September 2005 and 2011 when slaughter was lower as high price impacted profits, we have this year seen slaughter continue along at record, and yearly high, levels. This is extraordinary for this time of year. During winter and early spring, cattle slaughter usually runs 10-15% below the autumn and late spring peaks.
While the season continues to depress young cattle prices, slaughter cattle prices are running hot. The Queensland Cattle Market Index (QCMI) reached a record high of 218 points on Monday, easily surpassing the previous level of 213 points reached in December 2012 (figure 2).
Since cattle prices had their last leg up back in August, export beef prices have risen further in both US terms and, obviously A$ terms (as the A$ has lost 6US¢ since early September). While cattle prices have remained steady, the 90CL Frozen Cow to the US has gained 80¢, or 13%, to 713¢/kg swt and the Grassfed Fullset to Japan has gained 70¢ or 10% (figure 3).
Given the rising export beef prices, it’s relatively safe to assume processors can pay more for cattle: the main question is whether they will have to.
Over the last 10 years we’ve never seen a time when November and December slaughter has been lower than September, so it seems unlikely we’ll see supply wane before the end of the year. And again, we come back to needing unseasonal rainfall and an increase in restocker demand to see cattle prices continue to rise.
It’s remarkable to think that slaughter is still running 20,000 head/week higher than last year’s record levels, with the only conclusion being that the herd is continuing to be liquidated as prices have risen. Export prices can fall 10-20% and there would still be room for cattle prices to rise: even more so in young cattle markets.
Historically we haven’t seen slaughter fall late in the year, with it usually occurring following the Christmas / New Year break. This would be the target time for a rapid rise in cattle prices as the "have to get them off before Christmas" cattle have gone. Moreover, it might have rained, which will obviously push prices strongly.
Want to see more ?
Go to Cattle data
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.
Mecardo will send you its latest market analysis outlook delivered to your Inbox as it's published. You will also receive one month Premium access for free.
You tell us what information you want to hear about, so you'll only be alerted to information that is relevant to you.Learn more about Mecardo Sign Up Now!