Key points:
- Grainfed over-the-hooks (OTH) premium only 2¢ higher than grassfed indicator
- Ongoing demand uncertainty from export markets has placed downward pressure on domestic indicators
- Year-to-August grainfed beef exports back 9% on year-ago levels
Australia's lot feeding market has entered a period of decline, after steady increases in recent years had resulted in record levels of cattle on feed in the December 2019 quarter. Negative demand pressures from COVID-19 and increased store competition following an improved season have seen feeder buyers struggle to compete with restockers for the limited supply of suitable cattle. The domestic paddock feeder steer indicator for the week ending 25 September was reported at 408.75¢/kg live weight (lwt), 114¢/kg higher on both the start of the year and year-ago levels.
Finished grainfed cattle prices have fluctuated throughout 2020 in response to a number of changing market dynamics. Following the emergence of COVID-19 in Australia in March, all national OTH categories, as well as the Queensland OTH 100 day grainfed steer indicator, reported declines as demand for finished product plummeted. This was reflected in grainfed beef exports, which totalled 93,954 tonnes shipped weight (swt) in March, back 8% on year-ago levels. Through May and June, both grassfed and grainfed OTH indicators rallied, with the Queensland OTH 100 day grainfed indicator reaching a record high of 670¢/kg cwt in the last week of June.
However, since the beginning of July, despite operating above year-ago levels, the Queensland OTH 100 day grainfed steer indicator has been tracking down, as ongoing uncertainty in key export markets continues to place downward pressure on grainfed demand. For the week ending 25 September, the indicator was reported at 626¢/kg cwt, 44¢/kg below the record set three months prior, yet 35¢/kg above year-ago levels. The grainfed OTH indicator is currently operating at only a 2¢/kg premium to the national OTH heavy yearling steer indicator, which was reported at 624¢/kg cwt for the week ending 25 September. This grainfed premium is in contrast to the 42¢/kg premium the grainfed OTH indicator held over the grassfed indicator at the beginning of the year.
Exports of grainfed beef aligned with the decline in the grainfed OTH indicator, with exports for July totalling 88,786 tonnes swt, back 23% year-on-year, while August volumes were back 27% on year-ago levels at 78,021 tonnes swt. Grainfed exports for the year-to-August are sitting 9% below year-ago levels, at 720,488 tonnes swt.
© Meat & Livestock Australia Limited, 2020
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