Key points:
- National slaughter numbers decline due to continued tight supply
- Just over 700,000 head of live export cattle expected to be shipped in 2021
- Production expected to fall due to lower slaughter
Summary
The cattle and beef market continues at historic highs, with restocker and feeder demand fuelling record prices at the saleyard, which is flowing along the supply chain.
Good seasonal conditions across the eastern states and southern Western Australia continue to underpin demand and confidence in the sector. This has resulted in slaughter being revised down to 6 million head for 2021, the lowest level in 36 years. Carcase weights, while still expected to reach record levels, have been revised slightly down to 308kg, bringing overall production estimates to 1,848 tonnes carcase weight (cwt).
The live export industry is struggling with a range of issues denting the trade, with fewer cattle being sent overseas to key markets. Just over 700,000 head are expected to be exported in 2021.
The global trade environment continues to shift, offering both opportunities and challenges for Australian beef. COVID-19 vaccination rollouts are supporting demand for beef, reflected in domestic sales and increasing demand out of key markets despite a slow start in production this year. Since September, the Australian dollar (A$) has continued its upwards surge, currently sitting at $0.75US, adding pressure to exporters to remain competitive. On top of this, labour shortages, high shipping costs and record-breaking cattle prices are creating additional headwinds for exporters to make a return.
The increasing demand for protein from China has resulted in many suppliers shifting their focus towards this market (particularly the US and South America) to capitalise on Australia’s constrained production and ongoing trade tensions.
In recent times, China has approved more countries for importation as it attempts to diversify its supply channels in the wake of Argentine export controls and Brazilian cases of BSE, altering the beef landscape significantly.
For Australian exports, Korea remains a strong, reliable market, while Japan continues to purchase the most Australian beef.
Assumptions
Weather
The Bureau of Meteorology (BOM) is predicting above-average rain for all major cattle regions through until the end of February. It is also forecasting that Australia will experience a mild La Niña this summer. This increased rainfall in northern Australia should translate to increased pasture growth, which will continue to strengthen the national herd rebuild into 2022.
Supply
Seasonal conditions started to improve in autumn 2020, and by the end of 2022 calves born since this time are expected to hit the market – increasing the supply of cattle available.
The rebuild is expected to continue into 2022, as the BOM prediction of a La Niña will ensure that ground water supplies are available. The favourable harvest conditions of 2020 and 2021 have also allowed Australia a feed grain buffer should the 2022 season deteriorate.
