DESPITE wet weather in January delaying start up of some beef plants or limiting kills in others, weekly slaughterings climbed steeply to the extent that the week ending February 3, 2023, was the highest weekly kill in the past two years.
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While MLA acknowledges it does not capture the entire national kill in its weekly figures, it nevertheless recorded 108,724 for week ending February 3, which was marginally higher than December's high point for 2022 of 107,100 head and just a few head higher than the 2021 high point in late June.
Demand for kill space grew rapidly in the past months of 2022 with the 100,000 head/week mark exceeded by the third week of November.
Potentially an end to the liquidation cycle is close and the resultant drop off in non-fed slaughter would have a huge effect on lean-beef supply particularly if it coincides with the seasonal ramp up in demand for fresh ground beef in March to May.
Not surprisingly December slots filled quickly and space bookings for January were being made well before the wind down for Christmas.
Had it not been for the wet weather and the Australia Day public holiday, a further 15,000 to 20,000 head may have added to the January total which would have boosted beef export figures.
As it stands, a total of 51,471 tonnes was shipped to all destinations in January, up significantly on the January 2022 figure of 43,300t but naturally enough trailing the December 2022 figure of 76,100t.
While February continues to work through supply issues brought about by wet weather particularly in central and north Queensland, one major multi-site export processor said the situation for March and April was looking more positive.
Feedback they are getting from producer clients is that there are cattle to come.
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March will therefore be an important test for what supply might look like going forward and the collective capacity of the processing sector to meet that demand for kill space.
With 108,000 head/week already established as doable against a prevailing background of adverse weather and labour uncertainty, it will be interesting to see how much upside there is to be achieved in weekly kill rates through improvement in labour-related issues and a clear run with the weather.
It will also test the market.
For the moment the market in SE Qld has been marking time in a 635c to 670c/kg range for YP ox and a tighter 570c to 580c range for heavy cow.
Last September, same descriptions were 750c and 690c respectively but declined steadily through November as numbers came forward effectively wiping $1/kg or $300 to 400/head off ox and cow values.
Noticeably some processors have not been pushing for numbers in the past few weeks.
With unsettled weather, a rising dollar, overseas beef markets still very flat and labour an ongoing problem they are simply dropping days if they cannot get cattle.
In regard to the flat nature of overseas beef markets it may be the case that processors/exporters are anticipating some upside particularly in the US market for imported grinding beef.
US January 1 cattle inventory figures just released show a further 3pc decline on last year and the beef cow portion of the herd at its lowest level since the early 1960s.
But the drought that has driven these high rates of cow slaughter is receding.
Potentially an end to the liquidation cycle is close and the resultant drop off in non-fed slaughter would have a huge effect on lean-beef supply particularly if it coincides with the seasonal ramp up in demand for fresh ground beef in March to May.
Also pertinent in this scenario is the expectation that US fed-cattle slaughter will be lower in the second quarter due to a 3.7pc drop in the number of cattle on feed as at January 1. This would adversely affect the amount of available trim.
While the Australian side hopefully awaits some market improvement, it may also be the case that import traders on the US side have taken a step back in their buying activity to await some clarity to emerge around the supply situation in Australia and the seasonal ramp up of cow slaughter in New Zealand.
Steiner noted last week that some of the larger US buyers who were pushing the market up have hit the pause button.
Poised as the market is, weather will be the big factor in what happens next.
Chances are that US demand for imported lean will spike up but the extent to which Australia can respond with product will depend on cattle supply and slaughter capacity with its cornerstone of labour availability.
Extra cattle without the ability to process them in a timely fashion would be problematic.
As Steiner said: "This has significant implications for supply coming to the US market and we would think a more detrimental impact on cattle prices in Australia."
Fingers crossed for China access reinstatement
NOT so long ago the thinking among Australian players affected by individual plants being locked out of the China market was that they were unlikely to ever get back in.
But it seems a ray of hope has emerged with China starting to reinstate a few plants around the world, not just beef but all proteins.
A major processor contact here said this week: "We have all got our fingers crossed".
In Queensland, recent weather is still affecting production with Townsville getting only two days last week and three this week.
One Rockhampton plant managed to get back to five days last week and the other should step up from three days to five next week.
On the supply side the phones started to ring on Monday after the hot weekend but even before then the pipeline was starting to fill. Major south-east Qld plants are reported to be reasonably comfortable for cattle.
Comment from processor contacts this week was that March is looking okay with more expected after Easter when first-round musters ramp up.
On that basis the national weekly kill should step up to about 115,000/week in the immediate term and possibly on to about 125,000 by Ma, labour permitting.
In the US, imported Aust/NZ 90CL firmed a further 5 cents/lb to US245c/lb FOB East Coast, hopefully the start of a strong upward trend.
