AUSTRALIAN cattle producers might have been in a price pinch during the past few years, but their biggest competitors have been creaming off ever-better returns.
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Mecardo analysts Augusto Semmelroth and Angus Brown have charted just how acutely returns on Australian cattle have been hit by a sustained drought-forced turnoff of cattle, throughout a period when global beef prices have trended steadily upwards.
The charts also indicate how far prices could lift on the back of enough rain for widespread restocking (see graph below).
After the slump of the global financial crisis (GFC), cattle prices in US, Brazil and Australia staged a recovery out until 2011.
In mid-2011, while the US recovery continued because of stock scarcity after America's own ferocious drought (which is still playing out in States like California), prices in Brazil and Australia faltered.
Brazil's slowdown was currency driven, and prices soon regained their climb, if not as acutely as in the US.
But for Australia, the onset of drought and the start of the biggest turnoff of cattle since the late 1970s has kept driving prices down.
By late March 2014, Australian cattle prices were five per cent below those of January 2009, a time when beef producers had hoped they were pulling out of the GFC slump.
No wonder there is some pain in the bush.
Mecardo analyst Angus Brown took a different look at the same phenomenon using Chicago Mercantile Exchange (CME) futures prices.
Cheap, abundant US corn means Australian cattle normally trade cheaper than their American counterparts, Mr Brown wrote, ensuring cattle are finished at roughly the same cost.
But right now, Australian feeder cattle are trading at "extraordinary" discounts to their American counterparts, a double whammy of surplus cattle and expensive feed.
Mecardo's charts were drawn up just as the first good rain for the best part of a year fell across wide regions of NSW and Queensland.
At the Northern Territory Cattlemans' Association Conference in Darwin last week, Meat and Livestock Australia's chief economist Tim McRae reflected that the trends were crystal clear: the world wants more beef.
"Global cattle prices are reflecting this, make no doubt about it," he told the 600-strong audience.
"The Australian cattle producer just hasn't had a taste of it.
"It wouldn't have mattered where our dollar was last year; getting through 8.34 million cattle last year was going to have an impact on prices, and also the dollar eroded a lot of momentum."
He said the supply pendulum for producers was about to swing.
"At some stage through 2014, there is going to be a major shortage of market-ready cattle.
"I think for everybody who produces cattle, that might put a smile on your face.
"Processors and live exporters, that might mean you have to fight a bit harder for numbers.
"But overall, we may just join the global party of higher cattle prices in the next few years."
