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Insights August 2020

10 August 2020 |Cattle
Cattle image

Insights August 2020

10 August 2020 |Cattle
The August update provides an analysis of production and pricing trends for Australian cattle producers. It provides producers with a timely overview of current trends and an outlook for the coming months.

Overview

  • Australian cattle prices are expected to hold relatively steady as price support resulting from tight domestic supply and strong restocker interest is offset by increased competition in export markets.
  • Subdued beef demand through foodservice outlets in Australia and abroad will continue to weigh on markets and easing COVID-19 restrictions will be essential to providing some upward movement in Australian cattle prices.
  • Tightened restrictions on individuals and business across Victoria in response to COVID-19 will see worker numbers at meat processing facilities across the state constrained by one third.

Upside potential for Australian cattle prices remains unlikely until a sustained resumption of foodservice activity results in improved consumer demand. However, despite heightened competition in global markets, tight domestic supply and continued strength in restocker demand should see prices remain protected against significant downward pressure. 

Tightened restrictions on individuals and business across Victoria in response to COVID-19 will see worker numbers at meat processing facilities across the state constrained by one third. For the calendar year-to-date Victoria has accounted for 23 per cent of national cattle slaughter. The impact of the restrictions on processing capacity will be largely mitigated by reduced throughput due to a smaller herd and favourable seasonal conditions which have increased the emphasis on restocking.

Cattle prices are expected to benefit from tight supply as slaughter rates contract further in coming months.  Across June and July average weekly cattle slaughter in eastern states was 20 per cent lower year-on-year. Restocker demand in eastern states is also providing support for high prices, however further rainfall will be needed to continue encouraging buyers as below average rainfall over the last quarter has deteriorated soil moisture levels. The current outlook for eastern Australia will provide come confidence to producers looking ahead to spring.

The consumer demand outlook for beef hinges on a sustained easing of restrictions on foodservice outlets across Australia and in key export markets. Demand remains subdued, but easing restrictions in most Australian states and some export markets will offer some improvements. However, the reimposition and tightening of restrictions in parts of Australia, the United States (US) and Japan is creating uncertainty and reducing optimism.

Australian beef exports will also be challenged by the recovery of beef production in the US where supply will remain elevated for the remainder of 2020. A rising Australian dollar will also affect the competitiveness of Australian beef which is already at relatively high prices compared to international competitors.

  

Sources: Meat & Livestock Australia *EYCI and WYCI data between 26/3/20 and 2/6/20 is unavailable due to MLA suspending reporting on most price indicators during this period.

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