Insights September 2024

Commodity overview

• Australia’s cattle herd is expected to begin declining in 2024 with high slaughter occurring as the herd rebuild has matured.
• Cattle prices are expected to continue their steady rise as strong export demand absorbs elevated Australian production.

Elevated slaughter is expected to cause the Australian cattle herd to decline in 2024. Meat and Livestock Australia (MLA) project the herd to decline 1.4 per cent in 2024 to 30.2 million head. This follows three years of rebuilding in which the herd grew by 10.5 per cent from a low of 27.7 million in 2020. The combination of the herd rebuild reaching maturity and dry conditions has lifted cattle slaughter in 2024. Recent data from the Australian Bureau of Statistics showed the June quarter had the highest cattle slaughter since December 2019. Slaughter was up 23 per cent compared to a year ago. Growth has been driven by increased turn-off of female cattle, primarily older breeding cows. June cow and heifer slaughter up 36 per cent year-on-year. As a result, the female proportion of total cattle slaughter rose to 53.1 per cent in the June quarter. This female slaughter ratio (FSR) helps indicate the direction of the herd, with an FSR over 47 per cent correlated with a declining herd. Slaughter in the second half of 2024 is set to increase from the first half of the year. This is already evident in national weekly slaughter averaging nearly 140,000 head since the start of July. This is up 11 per cent on the average of around 126,000 in the first half of the year. Continued high slaughter will likely cause a further decline in the cattle herd in 2025.

High slaughter explains why Australian cattle prices remained below average in the past month. The Eastern Young Cattle Indicator (EYCI) at 676c/kg still trails its five-year average by 11 per cent. However, despite elevated supply, the EYCI has been able to steadily gain 16.3 per cent since the start of July. However, the last month has seen stability between 658-686c/kg. This places the EYCI 40.7 per cent higher year-on-year, even though weekly cattle slaughter was 10.7 per cent higher year-on-year.

Support for prices is expected to continue coming from firm export demand. Overall beef exports in August dipped 6.3 per cent month-on-month. However, exports to the US rose 6.5 per cent to sit 59 per cent higher year-on-year and 173 per cent higher than two years ago. Exports to the US in August were more than double the volume shipped to Japan, the second largest market. Unfortunately, export volumes to all other major markets saw declines in August. Most notably, exports to Japan fell 25.2 per cent month-on-month and South Korea down 13.1 per cent. These are somewhat surprising results as these markets are also receiving lower volumes from the US. This suggests that US demand is absorbing the volumes that could have otherwise gone to North Asian markets. Weak Chinese demand is expected to continue with August exports down 11.5 per cent year-on-year. Year-to-date exports to China are down 8.8 per cent on last year, the only major market trailing last year’s export volume.

The forecast of a high chance of exceeding median rainfall in the next three months should also encourage producers in eastern Australia. This should help keep restockers active over spring, adding further support to prices amidst high supply. It should also prevent the scenario of additional cattle turn-off which could tip supply beyond the capacity of the processing sector.

Source: Meat & Livestock Australia, DFF