In focus: Beef Market Update – March 2016
The Australian cattle industry is in the midst of a significant transition following a period of almost unprecedented growth in cattle prices.
- The Australian cattle industry is in the midst of a significant transition following a period of almost unprecedented growth in cattle prices, combined with a surge followed by retreat in slaughter rates.
- Cattle slaughter rates began to rise in 2013 as drought conditions started to bite in Queensland and elsewhere, forcing some producers to reduce stock levels. By 2014, US demand ramped up as the US cattle herd waned following a major drought in US cattle ranching states. This pushed US 90cl export prices, and later domestic saleyard prices, much higher. The depreciation of the Australian dollar over the period provided further support to prices.
- However, the above confluence of factors largely reflects one off events. Since mid-2015, Australian slaughter rates have retreated owing to a shortage of stock, the key US 90cl beef export benchmark has retreated from its highs of September last year and while we forecast the Australian dollar to fall to around 67 US cents by the end of the year, the majority of the adjustment in the currency has already occurred.
- We forecast domestic saleyard prices to stay high this year, but with volumes falling, the value of Australian beef exports is forecast to fall 10.4% in 2016-17. There appears to be little upside for US export prices given growing US beef supply.
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