By Angus Brown | Source: MLA's NLRS, ABS, NTDPIF
The cattle live export market continues to be particularly fickle. Cuts in the quarterly quota in July were followed by a mid-quarter increase, which was then followed by an increase in the quota for the fourth quarter back to previous levels. A backlog of cattle and weaker prices might have been expected from the low 3rd quarter quota. However, we have seen the opposite with prices hitting a new record, no doubt assisted by strong southern cattle prices.
Following the decision to cut the quota to 50,000 head for the third quarter, Indonesia released permits for a further 50,000 head of Q3 slaughter cattle in August. For the fourth quarter, the quota for feeder cattle has been increased to 200,000 head.
Figure 1 shows live cattle exports on a national scale for the year to June and the July and August numbers just from Darwin (Australia’s largest live export port), with other data not available as yet. Lower live exports were seen in July and particularly August as the space in the quota dried up.
For the last quarter, we have split the 200,000 head quota between the three months. Exports should be similar to 2014.
The cut in the live export quota to Indonesia didn’t really have a large impact on live export feeder steer prices. The Darwin Light Live Export Steer price actually fell heavily in May, before recovering in June and remaining relatively steady through July and August, at 250-260¢. This was assisted by the rapid rise in the Queensland Feeder Steer price (figure 2), as over this period more cattle would have been sent to southern feedlots, easing supply pressure in the live export market.
Through September, live export cattle prices rose in anticipation of an improved quota, hitting 300¢/kg lwt once the quota was announced. Despite the low numbers sent to Indonesia in the third quarter, it seems there is no backlog of cattle waiting to get on boats. This is not surprising given the expected reduced supply and the fact that prices in the south are now much more competitive than they have been for much of the last two years.
Apart from being some confirmation of the dwindling supply of cattle coming from northern pastoral areas, the strong price rise comes before the usual seasonal price rally generally seen in November. This would suggest we might see live export prices rally further over the coming months, but obviously this depends on the capacity of export markets to pay the higher values, but if there is a strong pull from southern lotfeeders they may have to.
For the cattle market in general the increase in cattle numbers which can go to export will further tighten supply, and support prices, especially in Queensland.
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