October beef exports down

October beef exports down

ANALYSIS
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October beef exports are down on September, but the result was not unexpected.

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AT 74,333 tonnes, October beef exports are down on September, when almost 80,000t were shipped, but the result was not unexpected.

In fact when adjusted for the number of working days in the month and a public holiday in some but not all states, the result suggests a relatively constant rate of production and export across the two months.

September had 22 working days out of its nominal 30 while October's 31 days yielded just 20 working days in the states where the public holiday was recognised.

Another factor which may have pumped September up a little was the big hike in grid rates that occurred in the early part of that month.

Grids had been languishing behind the markets and the tightness of cattle supply was such that processors were fearful that if they started losing days this far out from year's end it might mean labour drifting away from the industry for good.

Consequently grids jumped by 50c/kg for ox and 65c for cow taking rates to 760c and 730c respectively in south east Queensland.

This had the effect of pulling forward some October/November cattle into September and effectively shoring up that month as well as securing kills for early to mid-October.

However the lack of any real depth of numbers soon showed up when the cattle that shifted forward left the latter part of October exposed.

As a result, the third week of October saw a further adjustment to grids of 20-30c taking rates ox and cow to 785 and 750c.

Whether that will help in the run down to the end of the year remains to be seen but it would seem processors are not optimistic.

Two plants in Central Queensland pulled back to four days in the last week of October and look as though they will remain at that level through to Christmas closure.

Chances would also seem slim for a big enough flush of kill cattle in the south to attract the attention of northern buyers.

Riverina and Victoria markets are so far showing only modest increases in bullock and cow numbers and these are off a very low base.

Altogether, progression through to the end of the year will likely be at slow simmer rather than rapid-boil pace.

In terms of exports, that means Australia will not reach 900,000t for the year, a drop of around 15 per cent on 2020.

The nearest low point in the past 10 years was 963,000t in 2012, which was the end of a three-year back-to-back herd rebuilding phase.

The other eight years were all above 1 million tonnes and peaked at almost 1.3mt in 2014.

From a business perspective, processors will be pleased to rule a line under 2021 but at the same time they must have some reservations for the year ahead.

October and early November rain is shaping to provide a back-to-back season for those producers who were fortunate enough to get good rain in 2020 and finally the prospect of a break for those who weren't so fortunate.

If rain continues through the summer months, 2022 may see herd rebuilding step up a gear and continue to exert a tight hold on older cows that might otherwise have been a kill proposition. A higher heifer retention rate might also impact the availability of kill heifers either off grass or grain.

Non-fed steers and bullocks are the other part of the picture and with the feeder rates on offer through 2021, it is hard to see why there would currently be any significant numbers of grown male cattle in the grass-fed pipeline.

Given that these supply pressures revolve mainly around the availability of grass-fed cattle, it is not surprising that the market most affected in the mix of destinations for Australian product is the United States.

October's 13,633t continues this year's pattern of low monthly tonnages to the US and aggregates to just 121,715t for the 10 months to date.

Total exports to the US this year are therefore expected to fall short of 150,000t, by far the lowest volume in the past 20 years.

China, which in large part takes similar product, has also been taking similar monthly tonnages to the point where its year-to-date volume is virtually identical to the US at 121,395t.

It will be a close call at year end as to which country claims third largest market slot behind Japan and Korea.

October volume to Japan at 18,769t looked a little out of place given the strong, prior run of five consecutive months at more than 20,000t a month.

This market is currently holding at around 11pc behind 2020 level.

Korea stepped up its volume in October to 14,920t, which on a cumulative basis puts it 3pc ahead of same period last year.

It is likely Korea will finish the year at or slightly ahead of last year's figure of 160,000t.

November tight but extra grain cattle in December

WITH some good falls of rain thrown into the mix, November looks likely to remain very tight for kill cattle but according to some processor contacts, the supply challenge should ease to some extent in December with greater numbers of grain-fed cattle coming forward before the Christmas closures.

In southern Queensland it is now four weeks since basic grid rates were last adjusted with all the majors on a tight 780-785c/kg range for 4-tooth ox and 750c for heavy cow.

In the US despite significantly higher levels of beef cow slaughter, domestic lean beef prices continue to climb, which, in turn, is keeping upward pressure on imported lean.

Added to this, the combination of tight supply of imported beef, delays at ports and rising transport costs is widening the premium of imported over domestic product. Steiner's latest report puts this premium at US17c/lb for 90CL frozen Oceania product.

Indicator Australian/NZ 90CL blended cow was quoted up 1cent at US294c/lb FOB East Coast.

The story October beef exports down first appeared on Farm Online.

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