Insights October 2020
Insights October 2020
- Restocker demand is expected to remain firm for the remainder of 2020 based on the La Niña-driven wet outlook for eastern Australia which will provide strong competition among buyers at saleyards and support high cattle prices.
- Cattle buyers will have to continue competing for a reduced pool of cattle as seasonal conditions will also result in supply remaining much tighter year-on-year.
- The impacts of COVID-19 on consumer demand for beef and the competitiveness of Australian beef in export markets will become more prevalent factors in the longer-term once restocker demand subsides.
Competition among buyers at saleyards is expected to remain strong for the remainder of 2020 with prospects of wet conditions continuing under a La Niña adding to relatively wet conditions in eastern Australia in August and September. This is expected to continue to fuel demand from restocker buyers looking to increase herds to utilise available pasture while the prospect of abundant grain at lower prices will also give confidence to buyers looking to finish cattle.
Favourable seasonal conditions are also expected to sustain a tight supply environment as producers seek to retain stock for breeding to rebuild depleted herds. Supply has tightened throughout 2020 with average weekly eastern states slaughter falling by 19 per cent from February to September; down 28 per cent compared to September 2019. While high prices may draw some additional cattle to markets, it is likely that slaughter rates will continue to trend 25-30 per cent lower year-on-year for the remainder of 2020.
Cattle prices are expected to remain well supported at current high levels as buyers will continue to be forced to compete for a reduce supply of cattle. These factors are expected to extend a long positive run for the eastern young cattle indicator (EYCI). A new record high set in early October added to a period of over two months above the previously unprecedented level of 750c/kg. Encouragingly, the national heavy steer indicator has also remained at a high level, 19.5 per cent higher year-on-year.
While the combined influence of strong restocker demand and tight supply will be the prevailing drivers of Australian cattle prices for the remainder of 2020, the longer-term outlook for prices will become more dependent on the level of consumer demand for beef amid COVID-19 outbreaks. The competitiveness of Australian beef in key export markets will be tested as cheaper suppliers South America are expected to capture some of Australia’s market share. These factors indicate a correction in Australian cattle prices is highly likely once restocker demand subsides and supply recovers.
Source: Meat & Livestock Australia