Analysts say the latest cattle industry projections suggest record cattle prices could last through the rest of calendar 2021.
Meat & Livestock Australia’s (MLA) 2021 Cattle Industry Projections forecasts cattle slaughter to fall to its lowest level in 25 years as producers retain stock.
The rebuild comes after cattle numbers fell to 24.6 million head in 2020 – their lowest level since the early 1990s – as a result of prolonged and severe drought.
Improved seasonal conditions in southern Australia in 2020, and above-average summer rain in northern Australia in the 2020–21 wet season so far, are expected to produce an abundance of pasture in all major cattle producing regions across Australia except parts of Western Australia.
Analysts at Citi, in a note to clients, say MLA’s national herd projections remain largely unchanged with cattle supply to remain tight into 2021 as producers retain more breeding stock to rebuild herds and take advantage of increased pasture availability.
“MLA’s latest cattle industry projections suggest record cattle prices could last through CY21 on the back of an elongated herd rebuild phase and continued restocker demand,” the analysts write.
“However, this rebuild phase is expected to be slower than prior La Niña years (2010), given the severity of the 2018-19 drought and the resulting herd liquidation, which suggests higher young cattle demand for longer.”
Adult cattle slaughter finished 2020 down 16% to 7.1 million head and increased stock retention by producers is likely to see lower slaughter supply over the medium term.
“Cattle saleyard throughput has been constrained so far this year, with yardings down -38% on pcp last week,” the analysts at Citi say.
“Ample pasture and the low herd starting point has seen limited cattle supply, and prices are expected to continue being driven by competition amongst restocker buyers; particularly if good summer rainfall continues.”
At the MLA, Market Information Manager Stephen Bignell said 2021 represented a new frontier for the Australian cattle market, with the combination of a reduced herd, record high prices and a global market attempting to recover from the COVID-19 pandemic.
“Cattle supply is expected to tighten in 2021 as producers retain more breeding stock to rebuild their herds,” he said.
“Producer preferences to hold onto young cattle rather than turn them off into the vealer market is already evident. During the first few weeks of 2021, yardings and slaughter numbers have been down on year-ago levels.
“As the rebuild gains momentum on the assumption of above-median rainfall for the start of 2021, total adult cattle slaughter is forecast to fall 3% on 2020 levels, to hit 6.9 million head, the lowest in 25 years.
“The increase in cattle being retained for breeding purposes will cause the female slaughter percentage to drop, and in the second half of 2021, this is expected to fall below 47%, signalling a technical rebuild.”
Despite the expectations for slaughter to decline, national beef production is forecast to remain unchanged at 2.1 million tonnes carcase weight (cwt), similar to 2020 and levels recorded in 2017, which was also a herd rebuilding year.
“Beef production is underpinned by a forecast increase in carcase weights. In 2021, national adult carcase weights are forecast to lift 3.2% on 2020 levels, to average 301.3 kilograms per head,” Bignell said.
“The lift will largely be driven by an increase in the male portion of slaughter, coinciding with a fall in the number of females turned-off during the year.
“Carcase weights have trended steadily upwards for 20 years, with slight variations due to seasonal conditions.
“The growing size of the feedlot sector, with over one million head on feed, will also contribute to rising carcase weights.”
Bignell said beef exports are expected to lift 2% in 2021 to 1.1 million tonnes shipped weight (swt), growing to 1.2 million tonnes swt in 2023.
“In 2020, COVID-19 affected demand for beef in key markets due to the global drop in foodservice activity and market access issues. Global growth GDP of 5% is forecast in 2021, which should see global demand for beef rebound,” Bignell said.
“Despite the COVID-19 disruption, there is evidence that the domestic beef market remained solid in 2020, with Australia one of the largest per capita consumers of beef in the world and the domestic market is still the single largest buyer of Australian beef.”
Australian live cattle exports for 2021 are expected to be 960,000 head, down 9% on 2020 levels. However, demand from South East Asia for Australian cattle is expected to recover in the second half of the year.