By Angus Brown | Source: MLA, ABS.
Meat and Livestock Australia’s (MLA) Cattle Industry projections for 2019 were released yesterday, and there were few surprises. With cattle slaughter rates higher than expected, the herd has been cut, with impacts for cattle supply in the short and medium term.
Firstly the herd. We have been tracking the higher cattle slaughter rates, and in particular the strong female slaughter rates, for much of the last 9 months. MLA have taken the high slaughter as a herd liquidation, as they had to.
Figure 1 shows MLA are estimating that after a 5% increase in 2017, the Australian Cattle Herd fell 2.6% in 2018, and is slated for a further 3.8% fall to June this year. The consecutive falls, following so soon after the liquidation for 2014 and 2015, is expected to put the Australian cattle herd at a level not seen since 1997.
The dry summer in NSW and Southern Queensland has seen a large adjustment to the herd in MLA’s projections. The last update of 2018 has the 2019 herd at 27.95 million head, having seen some growth. The latest forecast herd figure is down 6.7% as females have kept coming for slaughter, and dry weather is hampering marking rates.
With a lower flock, we have to get lower slaughter. MLA are projecting the low in slaughter rates to come in 2020, as the lack of summer rain sees strong slaughter rates continue for some time yet. MLA do expect slaughter to fall 3.5% in 2019, and a further 3.3% in 2020.
Interestingly MLA don’t expect slaughter to fall to the levels seen in 2016 and 2017. The extreme low slaughter in those years was helped by bumper seasons, and resulted in herd growth of 4% in 2017.
It’s hard to see the herd achieving the forecast growth rates of 3% and 2.6% in 2021 and 2022 without a stronger decline in slaughter.
Key points
* MLA’s 2019 Cattle Projections have been released, with a lower herd and slaughter rates the main highlights.
* The Cattle herd is expected to hit a 23 year low, but slaughter is not forecast to go lower than 2017.
* A lower herd and slaughter will no doubt be positive for cattle prices in the medium term.
What does this mean?
An over 20 year low in the herd and associated tight cattle supply obviously means prices are in for a boost. Just how much of a boost will be governed by the weather. There is some upside potential for finished cattle, and a lot for store and breeding cattle.
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