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Insights November 2020

9 November 2020 |Cattle
Cattle image

Insights November 2020

9 November 2020 |Cattle
The November 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 remain supported at record high levels for the remainder of 2020 after the Eastern Young Cattle Indictor rose to a new record high of 822.5c/kg in October.
  • Abundant pasture availability in eastern Australia resulting from favourable seasonal conditions is expected to continue encouraging restocking and keep supply tight as producers retain stock.
  • A competitive global marketplace indicates that current Australian cattle prices will not be sustainable in the longer-term.

Strong restocker demand and tight supply are expected to continue supporting the Eastern Young Cattle Indicator (EYCI) in record high territory for the remainder of 2020 after a six per cent rise in October took the indicator to a new record high of 822.5c/kg. This places the EYCI 60.5 per cent higher than a year ago when markets were under pressure from destocking. Despite much drier conditions in Western Australia this year, the Western Young Cattle Indicator has also risen to new record highs.

Restocking buyers are expected to remain very active at saleyards as conditions in eastern Australia have produced abundant pasture growth. With many areas still understocked, producers will remain eager to acquire cattle to utilise available feed and be further encouraged by the positive rainfall outlook for the next three months.

Producer intentions to retain stock for herd rebuilding will also keep supply tight for the remainder of 2020. Average weekly eastern states slaughter in October was relatively unchanged from September and was 28.6 per cent lower than October 2019 when destocking was in full swing. Weekly slaughter has increased week-on-week for the last three weeks, largely led by Queensland.

Tight supply will continue to restrict the volume of beef available for export, as seen in October when the volume of Australian beef exports was 28.5 per cent lower year-on-year. While demand from Japan and South Korea is expected to remain relatively firm despite expected growth in United States exports to these markets, demand for Australian beef from the United States and China is a concern. Beef exports to the United States have declined for the last four months as domestic production has increased and exports to China in October were 58.9 per cent lower year-on-year.

Although domestic factors are expected to support Australian cattle prices for the remainder of 2020 and into the new year, a competitive global marketplace will have a growing impact on finished cattle prices once restocker demand wanes and could affect margins that producers are able to make on young cattle purchased at record high prices.

Source: Meat & Livestock Australia

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