Further declines in cattle prices are expected because of a rise in Australian cattle supply resulting from drier weather conditions, according to Rural Banks March insights.
The Australian Bureau of Meteorology (BoM) has called the end of the La Nina weather pattern, moving to an El Nino watch, which will increase the chances of drier weather conditions. The BoM forecasted a 50pc chance of an El Nino forming later in the year, which may cause drought conditions in the eastern states of Australia. Three La Nina years in a row brought above-average rainfall, creating record-breaking crop production, filling water storages, increasing soil moisture and a significant cattle herd rebuild.
Australian cattle prices have continued to decline into 2023, with the Eastern Young Cattle Indicator (EYCI) currently sitting at 680¢/kg, down by 39pc from 1,117¢/kg during the same time last year. Lower prices are largely because of increased supply of cattle coming into the market following multiple years of a herd rebuild, according to Rural Bank. The Argus-assessed Australian northern feeder cattle price was at 374¢/kg on 16 March, down by 33pc from 564¢/kg during the same time last year. Australian processors are decreasing grid prices on grain-fed cattle to feedlots, which is driving down feeder steer prices, after unsustainable high prices over the past two years and then a steep decline in 2023, when many feedlots and processors were making major losses on cattle.
Australian weekly slaughter numbers for the last week of February and the first two weeks of March remained above 110,000 head, up by 20,000 head from the same time last year, according to Meat and Livestock Australia. Slaughter numbers are likely to continue rising as more cattle continue to arrive into the market, according to Rabo Bank.
A rise in slaughter levels helped push February beef export volumes 18pc higher on the year. Beef exports for February totalled 70,379t, up by 37pc from 51,471t in January and by 18pc from 59,513t in February 2022, according to the Department of Agriculture, Fisheries and Forestry. A further growth in beef exports to China is possible if Brazil's ban on beef exports to China remains in place.
A steady decline in feeder steer prices will persist given the prediction of continued dry weather and higher slaughter numbers as more cattle come into the market, according to Rural Bank.
