THE flood of cheap cattle filling export orders and maintaining relatively steady retail prices could be nearing its end as the Australian beef herd continues its rapid shrinkage.
Not because the season is breaking, but because buyers are going to have to compete harder for stock.
Forced sales due to the expanding drought have kept numbers to slaughter high.
If the current kill rate of 170,000 head a week continues Australia will eclipse last year’s slaughter total of 8.3 million head.
Those who have been in a fortunate position to retain cattle, such as Jonathan Hassall, whose manager Marcus Lyons looks after his properties at Braidwood and Holbrook, have become increasingly scarce.
Many have watched as the ducks line up, including a lower dollar, a small US herd, high global prices and booming live exports. But we still need rain.
Perhaps the most lasting impact will be the number of breeders which have been lost from the system.
Meat and Livestock Australia’s (MLA’s) beef market analyst Ben Thomas said female cattle made up more than half the 6.1m head slaughtered to August this year.
“In our projections we estimated it would be level with last year’s kill rate, going off average seasonal conditions, but because the drought has continued for so long it’s kept the kill rate at high levels,” Mr Thomas said.
This huge sell-off of female cattle in the past two years has become a cause for concern for MLA’s new boss Richard Norton, who says it will take some time for the herd to recover.
“For the past two years the annual adult cattle slaughter has been above 8m head and on top of that live exports have also been at record levels,” the managing director told agents at the Australian Livestock and Property Agents Association annual general meeting in Sydney.
This will not only have a ?ow-on effect in the market with fewer available sale cattle, it will also mean a reduction in the cash ?ow for MLA, so Mr Norton said the company was planning ahead for this reduction in funds.
But it could also mean beef prices cop some upward price pressure even before a break in the season arrives, simply due to tightening supply.
Mr Thomas said increasingly strong competition would emerge between processors and live exporters to supply exports, which could also have a knock-on effect to cattle headed for the supermarket shelf, prices for which had already begun to rise with MLA reporting a 5.1pc increase year on year.
So far this year the big slaughter of cows has been driven not just by the dry, but good prices for better conditioned stock.
“That’s up 20 per cent on 2013 and 1m head or 47pc on 2012 for the same period,” Mr Thomas said.
This high slaughter rate has quickly brought the herd back from its peak in June 2013 of more than 29m head, which was the highest level since the 1970s.
“The 2014 estimate is 26.5m and we’re forecasting that to continue to decline into next year and be about 26m head, providing we have a normal season,” Mr Thomas said.
And it’s looking like the decline is set to continue.
Southern abattoirs have also reported higher slaughter rates.
“There are still some drought-affected cattle from the north being killed and there are fairly large yardings at Dubbo and further north at Roma, Queensland, but the southern processors have also been flat out,” Mr Thomas said.
What had been mainly a concern of northern NSW and Queensland beef producers has now spread into the State’s south as producers in the western Riverina and around Wagga Wagga move from selling surplus stock on to breeding stock.
Stock and station agent Ian Macleod, Hay, said most people in his area were destocking, be it in the store or prime market.
He said all surplus stock were sold and now it was down to the breeders.
“The country is bare and everybody is getting worried and destocking at a rapid rate,” Mr Macleod said.
He said old and late-calving cows made up a large portion of those sent to slaughter.
Destocking was also well under way around Wagga due to lack of water, according to Blake R.H. and Company agent Mark Logan.
For the past six weeks, 5800 head a week had passed through the Wagga saleyards as graziers bailed out of cattle they could longer feed.
Mr Thomas said it could take several years to rebuild the herd.
“Once we get a break I think the herd will plateau for a year or two before we start rebuilding again,” he said.
Meanwhile, export markets continued to improve, with Australia on track to send one million head of cattle overseas by the end of this year.
“We’re anticipating about 750,000 head to Indonesia and 130,000 head to Vietnam,” Mr Thomas said.
“If we hit the projected 1.1m head that will be highest for a calendar year.”
