By Angus Brown | Source: MLA.
The devastating floods that have afflicted far North West Queensland in recent weeks have somewhat abated, but we’re still hearing stories of cattle dying. The figure that most seem to be settling on for losses is around 500,000 head. We have been asked a number of times what this means for cattle markets and while it’s difficult to know, we can put the number into perspective.
At the end of June 2017, the Australian Bureau of Statistics put the number of cattle in the Southern Gulf, North Queensland Dry Tropics and the Northern Gulf at around 3.15 million head. Given the dry weather we’ve seen for much of the last 18 months, the number at the start of this year was likely to be lower.
If we stick with the 3.15 million head number, we can see that at a local scale nearly 16% of the cattle herd has been lost. For Queensland, losses account for 5% of the herd, while on a national scale it’s 2%.
Figure 1 shows how another 500,000 head would alter Meat and Livestock Australia’s herd forecasts. The herd was already headed for a 23 year low, but now the additional cattle exiting the herd will see 5.7% lost to hit 25.7 million head. The fall will almost be the same as the 2015 decline, though we haven’t had a herd under 26 million head since 1994.
The area affected by the floods supplies both slaughter and live export markets, but in what proportion is hard to tell. The loss of cattle will no doubt impact both markets. It’s unreasonable to expect that there will be 500,000 fewer cattle slaughtered or exported this year or the years after.
Regardless, Figure 2 shows how it would look if the 500,000 head were all breeders which produced no calves this year or any years after that. There is a good chance that total cattle supply for slaughter and live export will fall below the recent lows of 2015.
Key points
* The North West Queensland floods have reportedly killed 500,000 head of cattle.
* If correct, the floods have wiped out 16% of the local herd, 5% of Queensland’s and 2% of the National Herd.
* Prices were going to rise, but the fall in available supplies in Queensland will see further strength.
What does this mean?
The disaster which has hit the producers of North West Queensland is going to add impetus to what were already going to be strong prices, once the drought breaks. We are likely to see Queensland prices move to a strong premium to those in the south, as it becomes the major demand centre for slaughter, live export and breeding cattle. Cattle will be flowing north.
So far Darwin Live Export prices (Figure 3) are the only ones to move, gaining 20¢/kg lwt last week. Looking at the levels of 2017, it may be in for further rises. The higher prices will filter down to southern states, adding support for prices, as the urge to rebuild the herd is heightened in the short term and extended in the medium term.
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