Global AgriTrends, Media Release, 2 August 2023

Beef producers can expect a two-year holding pattern on cattle prices as drought conditions widen, processing sector labour shortages persist, and a huge stockpile of meat in Asian freezers start to thaw.

While lightweight heifers will take the biggest price hit, the emerging El Nino may mean business opportunities for producing heavy Jap ox and heavy feeder steers, according to market analyst Simon Quilty, of Global AgriTrends.

Low point feeder steer prices are expected this coming October and November with Angus feeder steers to fall to 350-380ac/kg liveweight (today’s price is 380 ac/kg LW), flat back (crossbred cattle) to fall to 300-320 ac/kg LW (from the current price of 325-330 ac/kg LW) and Brahman cattle to remain at the present price of 280 ac/kg LW.

The national feeder steer indicator price has tracked from 483c/kg in 2021, rose to 522c/kg in 2022, fell to 330c/kg in 2023 and is expected to remain flat at 340c/kg in 2024. It is tipped to rise to 470c/kg in 2025, 610c/kg in 2026 and potentially reach 630c/kg in 2027.

Feeder steer producers can expect liveweight prices to bottom out at 295c/kg in October/November, followed by a slight uptick and then bottom out at 295c/kg in June 2024. Global AgriTrends has forecast an eastern young cattle indicator average of 650c/kg for next year.

Mr Quilty, of Wangaratta, was the keynote speaker at the Pasture Agronomy Services seminar at Wagga Wagga on July 27.

He said the feeder steer market was presently in a two-year holding pattern off the back of struggling global economies and large quantities of frozen beef in cold storage in Asia.

China’s economy is weak with 20 per cent unemployment among young people, domestic demand is expected to fall in Japan for the next two years and import demand falling from 8 per cent last year to 1.4 per cent in 2023, and Korea’s GDP is also falling to 1.5 per cent this year.

“Beef stocks in cold storage around the world sit at 3.5 times the volume of 2020-2021. The recent slight fall of meat stocks is related to old stock being pushed onto the market. There have been heavy discounts to get this product moved quickly,” Mr Quilty said.

“Slow demand is not keeping up with increased supply and wholesalers are buying hand-to-mouth from importers of spot meat due to the large inventories.

“Beef consumption in Japan has fallen 13 per cent since 2003 to 178 grams per month while pork is up 50 per cent and chicken up 83 per cent.

“In Australia, there has been a moderate herd expansion, and a lack of labour has led to the processing bottleneck.

“The average weekly kill on the eastern seaboard stands at 87,126 head and prices have fallen 41 per cent in 68 weeks. This highlights how critical labour has become and its huge impact on your beef business.”

New and upgraded processing capacity coming online in the next six months across Queensland, NSW, Victoria and South Australia equates to 3000 head of cattle per day to lift the weekly average national processing capacity to 107, 500 head.

Globally, Indian meat works are looking to rationalise with three major plants for sale off the back of payment issues from Egypt, Iraq and other Middle Eastern markets. Around 200,000 experienced meat workers are expected to be out of a job in the next four to five years under that rationalisation.

Australia has struck a new agreement with India extending visas from one to two years for 3000 workers per year, along with a rise in salaries to attract skilled international workers and plug the labour bleed.

Mr Quilty advised beef producers to keep an eye on equity markets for tracking the path of imported beef indicators with a 90 per cent correlation.

“The Japanese Nikkei is a wealth indicator of the middle class and as consumer sentiment lifts with it, the price of beef goes higher. The same holds for the Korean market with a 91 per cent correlation, but it has a six-month delay,” he said.

“If we see an enormous correction in the stock markets, be aware, it will be reflected in demand for your beef and lamb.”

Global AgriTrends weather analyst Art Douglas is advising a broad and intense El Nino will be severe in Australia by December and there will be little or no northern wet season.

Dr Douglas advises the dry conditions are expected to last until late 2024 with an abrupt end in late 2024 or early 2025, with the liquidation of the national cow herd underway and a rebuild tipped to be occurring by 2025-27.

Medium cows presently at 194c/kg will lift to 250c/kg in December and plunge again to 190c/kg by next June before tracking upwards to 275c/kg.

Mr Quilty pointed to the heavy Jap Ox and heavy feeder steer as trading opportunities during the dry times.

“Heavy Jap Ox steers will be hard to produce over the next 18 months and will command a premium. Jap Ox prices hit a low in July at 276 ac/kg liveweight and this is expected to be the lowest price point for the next five years as processors pay a premium for heavy Jap Ox and heavy feeder steers will demand a premium from lot feeders,” he said.

“The quality of the carcase deteriorates in drought and processors are desperate for yield – the bigger the animal going through the better the return. I expect we will see a steady increase in the value of that Jap Ox right to the back end of next year at 415c/kg.”

Other opportunities in 2024 will be PTIC cows and heifers.

Gundagai agronomist and beef producer Mark Lucas, Pasture Agronomy Service, said with a 65 per cent chance of an average spring, southern producers could use pasture growth to add an extra 100kg of liveweight to their steers and strategically sell into a higher market.

“It will also pay to shore up relationships with who you have dealt with in the past to know they have a space for those cattle meeting specifications,” Mr Lucas said.