Livestock

Conditions will be key

By Country News

With the Australian cattle herd at a 20-year low, this year’s beef market will be heavily influenced by seasonal conditions, with a strong upside if seasons improve, according to a new industry report.

In its recently-released Australian 2019 Beef Cattle Seasonal Outlook, agribusiness banking specialist Rabobank said limited cattle inventory would make the market sensitive to any changes in demand and exaggerate any price upside as a result of increased rain and better conditions across the country.

‘‘Any meaningful rain, particularly in Queensland and NSW, would see beef producers — in addition to feedlots and processors — jump back into the market to buy cattle from what is a very limited pool,’’ report author Rabobank senior animal proteins analyst Angus Gidley-Baird said.

‘‘This could see prices rise by more than 20 per cent.’’

However, should the season remain drier than normal, Mr Gidley-Baird said prices would ease and remain below 2018 levels — with Rabobank modelling predicting an Eastern Young Cattle Indicator of between $4/kg and $4.50/kg throughout 2019.

Mr Gidley-Baird said Australian cattle slaughter numbers were forecast to contract by five per cent in 2019 — assuming drier than average seasonal conditions though an improvement on last year.

‘‘With this contraction driven by lower female slaughter rates — as producers hold onto more female stock — any improvement in the season would see slaughter numbers fall back further,’’ he said.

‘‘While in the southern areas — representing more growing and fattening — will see a reduction in the number of finished cattle available for slaughter over the next 12 months.’’

He said Australia’s key export markets were expected to remain strong, with trade flows increasingly focused on Asia.

‘‘Last year, Japan, South Korea and China took 58 per cent of Australia’s beef exports, representing the equal highest proportion in over three decades.’’

While Australian exports to Japan and South Korea grew by eight and 15 per cent, respectively, Mr Gidley-Baird said China accounted for the biggest increase, at 48 per cent.

‘‘The growing demand for protein in China, extenuated by the shortage in pork production due to African swine fever, has seen China increase its share in global beef markets,’’ he said.

‘‘The shift in focus to Asia has big implications for the Australian cattle market, as what happens in their markets will now have as much bearing as the US, which has traditionally been the price setter in the market.’’

The prices of heavier cattle classes were expected to remain firm, underpinned by limited supplies of heavy cattle.