Rural Bank forecast a 45% drop in slaughter rate as producers hang on

Analysts from Rural Bank are forecasting a 45% drop in slaughter for the next 3 to 4 months.

Record livestock prices in Australia are shutting down abattoirs

A sharp increase in cattle and lamb prices in New South Wales, Australia is forcing slaughterhouses to reduce their activity or even to close their facilities for a few months, according to local media.

JBS Australia was the first factory to shut down its doors last week, followed by Southern Meats, this week, reports ABC news channel. Since the beginning of 2020, prices for young cattle have doubled, while lamb prices are close to AU $10/kg . Even with coronavirus outbreak impacting the trade with other regions of the world, red meat prices in Australia are not expected to plunge too much as the country is facing a drop in cattle and sheep inventory.

The latest Rural Bank analysis is forecasting a 45% drop in the slaughter rate heading into winter as producers hang on to their livestock to re-build the flock after the long drought. According to MLA, the national flock projection for this year is 63.7 million head, the lowest figures in the last 116 years. "The impact and severity of consecutive drought years will be felt across both sheep and lamb supply in 2020 and for a number of years to come. Sheep slaughter is forecast to decline 22% to 7.2 million head in 2020 and lamb slaughter is anticipated to decline to 21 million head, which is 8% below the pre-drought peak in 2016," commented Adam Cheetham, senior market analyst for MLA.

The current situation can have a broader impact on the Australian economy, as the meat processing sector is the country's biggest agricultural industry. However, Patrick Hutchinson, the CEO of the Australian Meat Industry Council, expressed his hope that the abattoirs will adopt measures that will not severely impact the workforce market. "They may go to shutting down completely, they may go to three days a week, or two shifts to one shift, there's a number of levers they can pull," he said.

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