Global markets remain shrouded with uncertainty, and Australia is no exception, with the economy shrinking for the first time in nine years during the March quarter and a recession on the horizon – the first in 29 years.
Before COVID-19, the Australian red meat industry had to navigate a range of complex market pressures. African Swine Fever creating a sizeable global protein deficit, a US-China trade spat, domestic challenges on the back of prolonged drought and a national bushfire crisis, to name a few.
Thankfully, the recent improvement in domestic conditions has instilled an element of confidence in producers looking to rebuild depleted herd and flock numbers. A positive rainfall outlook continues to encourage producers, despite the unprecedented and unpredictable nature of COVID-19 in Australia's key markets.
Records tumble
Following two consecutive years of unrelenting drought, a significant improvement in water and feed availability would be the catalyst to propel domestic livestock prices to record levels. Across sheep and cattle, records tumbled, driven by robust competition from producers looking to restock paddocks and processors competing for a reduced pool of livestock.
A selection of saleyard indicator records to-date include:
Cattle:
- The Eastern Young Cattle Indicator (EYCI): 772¢/kg carcase weight (cwt) – 17 June 2020
- The National Heavy Steer Indicator: 383¢/kg live weight (lwt) – 23 June 2020
- The National Feeder Steer Indicator: 410¢/kg lwt – 10 March 2020
Sheep:
- The Eastern States Trade Lamb Indicator (ESTLI): 966¢/kg cwt – 11 March 2020
- The National Restocker Lamb Indicator: 1,025¢/kg cwt – 10 March 2020
- The National Mutton Indicator: 729¢/kg cwt – 12 March 2020
Domestic prices across all species remain at historically high levels, as supply constraints have tipped the balance in favour of support for Australian livestock prices, despite the impact of COVID-19 on overseas demand.
Supply squeeze
Winter in Australia (June to August) typically marks a low point in supply across all species, albeit more pronounced across the sheep and lamb market. This winter is shaping up to be no different, with cattle, sheep, lamb and goat slaughter all running below year-ago levels.
Sheep Market:
The national flock has been in contraction since 2017, attributed to very high slaughter in recent years across large areas of Australia's major sheep producing regions. Estimates place the national flock at 63.5 million head, its lowest level in more than a century. Given the depleted breeding ewe flock, fewer lambs on the ground and heightened stock retention, the availability of livestock during winter is expected to be particularly tight. However, the focus for producers in the short-term will be on
improving lamb survival rates, which in turn should support marking rates and lamb supply towards the end of the year.
MLA supply estimates for the Australian sheep industry in 2020:
- Lamb slaughter – At 20.6 million head, back 5% year-on-year
- Lamb production – At 492,000 tonnes cwt, back 2% year-on-year
- Sheep slaughter – At 6.5 million head, back 30% year-on-year
- Mutton production – At 161,000 tonnes cwt, back 29% year-on-year
Cattle Market:
From a cattle supply perspective, the impact of improved conditions on producer intentions is anticipated to see cattle turnoff decline to the lowest point since the mid-90s and remain at historically low levels for the next two years. Demand for young cattle and breeding stock heading back to the paddock has risen and will remain strong should domestic conditions hold up. Processors have increased livestock grid prices to maintain the flow of cattle for processing, however, limited availability and robust competition between southern and northern abattoirs has resulted in some shortened processing weeks.
MLA supply estimates for the Australian cattle industry in 2020:
- Cattle slaughter – At 6.9 million head, back 19% year-on-year
- Beef production – At 2 million tonnes cwt, back 16% year-on-year
