Cattle update - August 2024

The Australian cattle market performed strongly the past month led higher by export cattle categories as demand from the northern hemisphere strengthened seasonally. Heavy steers and cows are now trading at levels of early 2023, having recovered the losses of the past 18 months. Markets remained well supplied (slaughter remains high, up 16 per cent on last year and up 13 per cent on the 5 year average) which is testament to the strength of demand.

Feeder and restocker steer values have been a little slower to recover but are starting to gain momentum owing to their relative attractiveness compared to finished cattle prices.

Over the next few months, we transition to a period of weaker demand in the northern hemisphere as the summer grilling season ends and temperatures cool. This is also a period of higher US cow slaughter. US feedlots remain heavily supplied with market ready cattle while South American suppliers have started to pivot away from China to the US, which may signal a cooling in demand from China.

In the past few days there have been global economic growth jitters with corporate earnings on the slide, and heightened volatility in asset markets. There are signs that some of our more price sensitive markets (for example, live cattle exports – see comment below) are starting to baulk at the recent price hikes.

On the positive side, while the next few months we may see some softening in international demand from current levels (beef exports were extremely strong in July), we should soon get a reprieve from heavy supply.

Elders National Livestock Manager Peter Homann reports that “there is virtually no cattle with any weight in the south (there is a green drought across western Victoria and parts of South Australia), while northern operators are currently finishing their second muster and we should start to see supply ease toward the end of September”.

So, this combined with a weaker Australian dollar ($A) should see cattle values at least maintained at current levels through the end of 2024.

Fed beef prices start to ease seasonally

The US fed beef price which is the best indicator of the price of Australian finished beef prices in export markets has started to ease seasonally the past few weeks as demand for grilling beef items in the US slows.

This helps explain why local heavy steer values have started to plateau a little heading into August. US feedlot numbers remain around the same as last year and with feedlotters feeding to heavier weights, US supplies of fed beef remain solid, limiting the upside on Australian heavy steer values.

Competition from southern processors in northern markets is helping to maintain the firm local price trend. With demand for finished beef expected to continue to ease into the US autumn we may well need help from a tightening in local supplies and a weaker $A to maintain price levels.

Australian heavy steer market indicators c/kg lw

The table shows the heavy weight steer saleyard indicator price for each state against last week, last month and last year. Source: MLA.

Cow prices firm strongly

Prices for Australian lean beef in the US market firmed strongly throughout the past few months with manufacturing beef prices almost the equivalent of fed beef prices. Cow processing margins remain strong which should underpin local cow values.

The main risk to the maintenance of current prices is competition from South American beef. For the past month South American suppliers have shifted their focus towards the US market owing to better returns (even after paying the 26.4 per cent tariff). It’s hoped that lower Chinese beef imports in July will help China to reduce its beef stocks and allow for a recovery in Chinese domestic beef prices.  

Australian cow market indicators c/kg lw

The table shows the cow saleyard indicator price for each state against last week, last month and last year. Source: MLA.

Young cattle prices follow export categories higher, but local food service demand contracts

The price of young cattle for the domestic market have followed export cattle categories higher. Like with other slaughter categories, supplies are tight in the south.

As evidenced by July’s beef exports – 130,000 tonnes up 22 per cent for the month, the focus of local processors has been export markets. 

Elders National Livestock Manager, Peter Homann reckons “domestic retail demand for beef to take home is holding up but there has been a fall in the amount of beef going through food service channels as cost-of-living pressures bite and people are happy to stay home and cook, particularly during winter”. 

EYCI c/kg cw

The table shows the EYCI (QLD, NSW, VIC) and the feeder steer (SA&WA) saleyard indicator price for each state against last week, last month and last year. Source: MLA.

Demand for feeder steers has started to pick up. Our contacts report that many feedlots are in the process of expanding and custom feeding pens are becoming hard to find suggesting that feeding margins are improving. 

While feed cattle prices have moved higher, this has been more than offset by the decline in feeding costs with grain prices falling from $420 per tonne at the end of May to around $365 per tonne currently with the likelihood of further falls in northern markets where a good harvest is almost assured. New crop wheat delivered Downs January is around $335 per tonne. 

Feedlotters are possibly eyeing opportunities for grain feed cattle on longer feeding programs targeting markets in 2025 when US production is expected to fall.

Restockers remain good value

The prices of restocker cattle have lagged the finished cattle market, owing largely to the time of year where pasture availability has tightened towards the back-end of winter. As temperatures start to increase stimulating pasture growth entering spring, we will see the prices of these cattle improve relative to the finished cattle market.

The Elders restocker value index suggests that restocker cattle remain cheap relative to the finished cattle market.

Restocker steer indicator c/kg lw

This table shows the restocker steer indicator. Source: MLA.

On the live cattle export front, Livestock Manager Paul McCormick notes that “trade inquiry for Indonesia is sporadic however prices appear to be holding despite reports that Indonesian feedlots are well supplied with market ready cattle. Also noting Vietnam buyers have recently asked for a price on cows – no doubt a reaction to isolated offers up to $3.20 per kg for slaughter steers ex Townsville”.