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Cattle prices pass the peak and now on down hill run

Restocker (200-280kg) steers peaked at 542c/kg in January and are forecast to fall by 10 per cent to 490c/kg in July-October, and a further 24 per cent to 410c/kg in January 2022.

Australian cattle prices have been tipped to fall this year by 10-15 per cent but top quality genetics will be sought as the national herd continues to expand to 29.4 million head.

Global Agritrends Down Under managing director Simon Quilty said the 2019-2023 price cycle peaked at 898c/kg in March and will finish with an Eastern Young Cattle Indicator low of 535c/kg CW in 2023.

This current cycle is 22 per cent higher than the 2014-2018 cycle average of 546c/kg.

Mr Quilty expects feeder steers weighing 380kg to 440kg to be around 400c/kg by June and fall to 350c/kg in the last quarter.

Factors playing a role in the prices include feedlot demand, COVID-19 restrictions lifting, Chinese New Year demand, tightening South American beef supplies and easing grain prices.

Speaking at the Reiland Angus client seminar at Tumut on March 31, Mr Quilty said global meat demand would place pressure on feeder steer buying before the year is out, with numbers rising on the back of lower grain prices.

“The concern now is over fat feeder steers – heavy feeder steers will end up as a Jap Ox,” he said.

“Grass fed steers have been losing $250-$300 per head at the processor – the only reason they have been paying that money is to get throughput and keep the workers on, and trying to hold a market together.

“They are going to pay the cheapest possible money for that Jap ox they can.

“Be wary if you produce an animal that misses the grade and ends up as a Jap Ox – the price spread will widen and being too fat will be penalised.

“Within four to five months, the price spread between feeder and medium steers is likely to balloon out to $1/kg and to $1.50/kg for feeder and heavier steers.

“That’s the type of discount we are likely to see in a short space of time.”

Mr Quilty expects an abrupt feeder steer price correction in June back to 350c/kg followed by a 12 per cent fall in last quarter of the year.

With vealers (280-330kg) sitting at 505c/kg, he tips the softest landing for this category with the average price this year around 472c/kg – up 18 per cent on last year – and finishing the year at 450c/kg.

“It won’t be until October that most processors start to make money on grass fed animals in Australia,” he said.

Cheap South American beef slammed the cow market resulting in a peak of 344c/kg last October/November and this category is tipped to fall by 25 per cent to 233c/kg in June.

Restocker (200-280kg) steers peaked at 542c/kg in January and are forecast to fall by 10 per cent to 490c/kg in July-October, and a further 24 per cent to 410c/kg in January 2022.

“In terms of cattle prices, we are still 13 per cent higher than the US and 46 per cent higher than South America,” Mr Quilty said.

“This current price cycle will finish in April 2023 and I expect the low to be 535c/kg.”

Mr Quilty told beef producers US cattle and beef prices will rise, global corn and grains prices will move higher, while Brazil and Argentina will emerge again as commodity beef powerhouses in two to three years time.

Over the next four to five years top quality Angus, Hereford and Wagyu genetics will be sought as the nation herd expands to 29.4 million head.

He said lamb would be the shining light, with prices moving ahead of high end grainfed beef.

Mr Quilty said US sales of the Never Ever grass fed product jumped 75 per cent in 2020 off the back of a push for healthy product during COVID-19 by US consumers while organic food sales were up 52 per cent.

“In the US meat sector, there was a genuine push for healthy related food products,” he said.

“In January, fresh beef sales in the US were up 19 per cent and fresh lamb up 30 per cent year-on-year despite the cruise line, airline and white tablecloth restaurant industries being shut down.

“Beef rallied well – it was up 22 per cent in the third quarter, 18 per cent in the fourth quarter. The clear message is, with extra discretionary spending, the beef and lamb industry have done exceptionally well in North America.

“E-commerce has been critical in showing people how to cook expensive pieces of meat. It has educated the market place in a way we have never seen before.

“It was a revolution in fixing the problem of education and how do we go about it.”

Mr Quilty said eating meat remained the norm with 81 per cent of the the nation’s population being meat eaters.

Vegetarian/vegan have been steady at five per cent for the past 15 years while two per cent are pescatarian (fish only).

Flexitarians (diet choice based on food safety issues) comprise 12 per cent but tipped to grow to 25 per cent in the next five years.

“It will grow at the expense of the meat eating category and that is ground for beef and lamb producers to lose as an industry,” Mr Quilty said.

“It will require a huge effort to ensure we don’t lose that ground.

“There is no doubt alternative meats are out there but let’s put it in perspective – retail meat sales in the US were US$84 billion compared to plant based alternatives at US$0.8 billion, or less than 1 per cent of total sales.”

Coming off the back of the COVID downturn, the International Monetary Fund forecasts GDP growth to be 8.1 per cent for China, 5.1 per cent for the USA, 7 per cent for Malaysia, 3.1 per cent for Malaysia, 4.8 per cent in Indonesia and 3.1 per cent in South Korea.

Mr Quilty said beef and lamb demand would be strong in that environment.

“Our major markets all look to be having a strong year in terms of GDP and there continues to be strong spending on meat sales in those markets,” he said.

“We have had a rising high end market and collapsing commodity market so the message is the flight to quality in both genetics, expansion of grass fed Never Ever programs and brand promotion.

“We have a three year stay of execution until Argentina and Brazil come back in and flood the market with cheap commodity beef.”

Japan is set to temporarily impose higher tariffs on US beef with imports for the fiscal year ending this month expected to exceed the maximum amount set under the Japan-US trade.

This is the first time the safeguard measure has been imposed on US beef since August 2017.

Japan had imported an accumulated 233, 112 tonnes of US beef by the end of February, just shy of the maximum 242,000 tonnes agreed for this fiscal year, according to Japanese customs data.

The tariff will rise to 38.5 per cent from 25.8 per cent for 30 days.

“Donald Trump has given us a comparative advantage in Japan because America is limited on what it can sell there in terms of volume of chilled beef on a regular basis,” Mr Quilty said.