THE TAPERING of frenzied restocker activity that has been the key driver of cattle market declines this year is likely to continue through the next financial year, pushing saleyard prices further down, forecasts from senior government economists released today indicate.
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The Australian Bureau of Agriculture Resource Economics has average saleyard prices this financial year falling to 726 cents a kilogram liveweight as drying conditions in south-eastern Queensland and northern New South Wales from the end of last year combine with an average pasture growth outlook to slow the action in the herd rebuild.
It's Agricultural Commodities Report for the 2023 March quarter says there is more of that to come. In the next financial year, it has average saleyard prices falling to 708c/kg, on the back of the prediction that most parts of the country will see only average pasture growth thus stopping the herd rebuild altogether and lifting turn-off.
ABARES' Jonathan Wong does make the point, however, that the decline would be limited by higher world beef prices, propped up by shorter supply as the United States herd starts its rebuild.
Controversially, ABARES has played down reports of the labour crisis in abattoirs severely hindering Australia's beef production ability over the next few years.
It says processing capacity is, in fact, not expected to affect the slaughter numbers through to the 2027-28 financial year. It points to Australian Bureau of Statistics data which shows a significant increase in the number of meat processing workers late last year.
"There have been reports that abattoirs who increased their wages for workers have had greater success in attracting and retaining workers than those that have not," the ABARES' beef and veal outlook says.
"The value added per meat processing worker has increased since 2000-01, reflecting an adaptable sector that has increased its productivity. It also shows that slaughter capacity has historically been more closely related to profitability than the number of workers employed."
Government beef economists have been more conservative in their forecasts for herd growth that other sectors of the industry, predicting a 9 per cent lift in 2022-23 to 24 million head.
Mr Wong made note of evidence that the flooding events of 2022 and early 2023 had damaged pastures in some areas of eastern Australia.
He said with the Indian Ocean Dipole returning to neutral, and the La Nina event dissipating, a decline in rainfall for the rest of this financial year looked likely.
Nonetheless, graziers are expected to continue to rebuild in the short-term.
ALSO SEE: Land use change key to slow herd rebuild
ABARES says the gross value of beef and veal production is forecast to fall to $14.4 billion this financial year due to the lower livestock prices, and remain steady the following financial year.
As prices continue their downward trend next year, turn-off will increase and therefore so too will beef production.
The gross value of production will then trend upwards though the outlook period to 2027-28, ABARES predicts.
Settling at this level
While there is debate about the degree to which the herd will grow as a result of rebuilding efforts, most analysts and agents seem to feel cattle prices are now settling at the new level.
Rabobank's latest outlook says modelling suggests the current prices should be more sustainable for all operators in the supply chain and most cattle classes appear to have levelled out after the drop through late last year and January.
It did point out, however, that feeder steers and young restocking cattle continued to drop through February - down 5 to 9pc.
While cattle on feed numbers for quarter four of 2022 showed an 8pc increase, Rabobank says they remain below the highs of quarter one, reflecting a softer demand for longer-fed beef products and caution among retailers not to overstock supply chains.
Meat & Livestock Australia business analyst Tim Jackson said despite the fall in saleyard prices, Australian cattle still retain a considerable premium over their South American equivalents.
From a local peak in October 2022, Australian heavy steer prices have fallen 22pc to US418c/kg carcase weight, MLA reported.
"This reflects the fall in price of Australian cattle, but also a slight decline in the Australian dollar which has kept Australian prices competitive in the global market and, to some extent, protected prices from global conditions," Mr Jackson said.
"Using data from MLA's National Livestock Reporting Service and the US Department of Agriculture to replicate the Brazilian Boi Gordo Heavy Steer Indicator, it's clear that this shift - as well as cattle prices across major beef-trading nations generally - has been in line with local weather patterns and the broader economic environment."