There was always going to be a cattle price correction after the steep rise experienced during Covid 19. The price graph below, from Pairtree’s Livestock Markets dashboard, shows the picture clearly. The big rise starts in January 2020 and peaks around May 2022.
What’s taken many by surprise, however, is the speed it has dropped since then, particularly in the past six months. As we write, the National EYCI (Eastern Young Cattle Indicator) sits at 566c – the same price it was at the start of the pandemic in Australia.
The Livestock Markets dashboard included in Pairtree PLUS subscriptions tells the story.
Click on image to enlarge. All other state prices and saleyards also available*.
We caught up with Tim Sullivan, Director of Endeavour Meats, whose company processes, trades and exports cattle and sheep to 30+ international markets, including China and Japan, and supplies premium branded cuts to big retailers including Harris Farm.
We asked Tim for his take on current cattle prices and what he thinks the future holds for Australian producers…
TIM: Unfortunately, I don’t think we’ve seen the bottom yet but I’m optimistic about the future. It’s not just the correction we had to have – there are other factors at play here: confidence, inflationary pressure including interest rates, higher costs and a stagnant market.
Beef and lamb are among the more expensive proteins now with pork and chicken very competitive. The big supermarkets haven’t passed on the savings with beef and lamb which is very disappointing as that impacts demand. Consumers are still paying top dollar but that’s not getting to producers.
At the high end, white tablecloth restaurant, business has slowed and that’s had a knock-on effect all the way down. It’s not just the Australian economy – it’s the same across our key markets of the US, Japan and Korea.
I do think it’s going to get worse before it gets better – not because of climate conditions for us, just a lack of demand and a fairly stagnant market right now. Unfortunately, as the prices have corrected the cost of fertiliser, labour and everything else has increased.
It’s great that backpackers are coming back for other agriculture jobs, but there’s a limit to how many unskilled jobs there are at abattoirs, so the need for training and retaining skilled workers needs to be addressed so we can ramp up production when there’s increased demand.
The elephant in the room (and good news for us) is that the US sets the tone for beef prices globally and they’re coming off the back of a huge kill off after their drought. So they’ve been selling plenty of meat around the world at cheap prices but that’s coming to an end.
The party is over for them and we’re seeing big price increases there and that will take time to flow through. Japan and Korea will look to Australia as the US prices rise.
The US is at the opposite end of the cycle to us. During our drought we killed heaps of cattle and it’s taken us this long to restock. In fact, the MLA says our national herd will reach its highest level in 20 years by the end of the year.
I’m also optimistic that the new UK free trade agreement could play a big part in the next 10-15 years. Hopefully our grass-fed product will replace Brazilian product because of our lower tariffs there. That’s a longer-term goal.
I anticipate that by November, December it will turn around for Australian producers. The Northern Hemisphere eats much more red meat in their winter, so the demand will increase then.
I think the fundamentals for Australia are right for a very strong 2024 and even stronger 2025.
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Grain prices and futures from iGrain & Chicago Board of Trade also included.
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