By Angus Brown | Source: MLA, ABS.
The lack of summer rain has seen cattle slaughter open the year on a solid upward trend. Slaughter rates usually ease their way into the year, as processors start up from the break. Early indications are that this year January is on track to post a three year high slaughter rate.
We have now seen three weeks of Meat and Livestock Australia’s (MLA) weekly slaughter data, and given the season, the rates should come as no surprise. Slaughter finished December on a high, as shown in figure 1, posting the 3rd and 6th highest levels for the year in the last two weeks.
While the start of the year has started at slaughter rates much lower than the end of 2018, they are running hot compared to the last two January’s. In the first three weeks there have been 301,364 head of cattle slaughtered, up 7% on the same three weeks last year. We haven’t seen slaughter over 300,000 head in the first three weeks since 2015.
Slaughter rates have opened higher in all states, but Victoria and South Australia have led the charge, increasing kills 10% and 23% respectively. It should be remembered that the southern states are smaller contributors to east coast kills.
Queensland accounted for 38% of the first three weeks slaughter, and NSW 28%. Queensland and NSW also report the sex of cattle being slaughtered. For those looking for a herd rebuild there are some depressing numbers.
Queensland’s female slaughter has been around 25% higher than the first three weeks of 2018. In NSW there have been 18% more females slaughtered. We often talk about female slaughter rates being a precursor to herd direction. The lack of rain in late December and January has seen northern cattle producers again bite the bullet and ramp up the herd liquidation.
Key points
* Cattle slaughter has opened the year at stronger levels as rain stays away.
* Female slaughter in Queensland and NSW has been running much higher than last year.
* Heavy cattle supply has seen prices fall, and makes weaner sales now look expensive.
What does this mean?
Strong slaughter rates combined with high early yardings has had the predictable impact on prices. Figure 2 shows the Eastern Young Cattle Indicator (EYCI) tanking to a four year low for January. Every year we talk about how the EYCI usually doesn’t open steady, it moves up or down depending on summer rain. The lack of any real rain since mid-December has seen supply strengthen, and demand weaken.
The weakness in the EYCI makes the prices seen at recent weaner sales seem more expensive. In fact it adds 20¢/kg lwt to the basis levels. Figure 3 shows it now makes them the most expensive weaners, on a basis scale, we have seen over the last 18 years.
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