This article is bought to you by Orange Truck & Ag and RFM No Till.
By Angus Brown | Source: MLA, ABS, Mecardo
Key points
· MLA is projecting current year cattle slaughter to be much stronger but falling heavily in 2020.
· A lift in the 2018 herd sees projections running higher than previous estimates.
· The 15% fall in slaughter next year will offer plenty of support to already strong slaughter prices.
Meat and Livestock Australia (MLA) released their herd projection update last week. The dry weather and consistently high slaughter has driven some revisions in slaughter projections. The closing herd for 2018 did come in higher than expected, which has bolstered slaughter estimates for the coming years.
The most significant change in MLA's herd projections came from the Australian Bureau of Statistic (ABS), with the June 30 2018 herd coming in at an unexpected high of 28.05 million head. This 2018 herd figure is 2.7% higher than the April estimate.
The additional 750,000 head in 2018 has allowed slaughter rates to be increased while keeping the herd higher than the April estimate. Figure 1 shows the national herd is now expected to bottom out at 25.8 million head in 2020, rather than 25.2 million in 2019. The herd is expected to fall 7.2% in 2019, and 0.8% in 2020, before gaining 2.7% and 3% in 2021 and 2022 respectively.
Ad - Used Machinery buying opportunities at Orange Truck & Ag. We also rent - Ad
Ad - RFM No Till is revolutionary Planting Technology - Purchase now or defer your payment and save. RFM No Till is a DelayPay supplier - Ad
The herd is not expected to get back to 2018 levels in the next three years. The 27.1 million head herd projected for 2022 is still lower than every year between 2005 and 2018, except for 2010.
The other major change in MLA's herd projections was a 5.2% lift in 2019 slaughter. Figure 2 shows 2019 slaughter is expected to move above 8 million head for the first time since 2015, with the final figure tipped at 8.1 million head.
Cattle slaughter rates in 2020 are expected to fall to compensate for the lift in 2019. The higher than expected herd has meant it hasn't had to fall too far. There were only 100,000 head, or 1.4%, stripped off 2020 slaughter, but it will still be the lowest level since 1996.
2021 slaughter will also be lower than any year since 1996, at 7.15 million head, before lifting to 7.5 million head in 2022. Even at 7.5 million head, slaughter will still be 7.5% lower than this year.
What does this mean?
MLA's projections are based on the dry forecast for the rest of the year, while they expect a return to normal seasonal conditions for the coming years. Seasonal conditions will no doubt dictate supply, but the declining herd means that slaughter simply can't move higher unless seasonal conditions remain as bad as they have been for two years.
On the price front, we know that prices for slaughter cattle have been strong, even during a year when over 8 million head are going through the works. A 15% decline in slaughter, which is expected for 2019, will put plenty of upward pressure on cattle prices.
Ad - Used Machinery buying opportunities at Orange Truck & Ag. We also rent - Ad
Ad - RFM No Till is revolutionary Planting Technology - Purchase now or defer your payment and save. RFM No Till is a DelayPay supplier - Ad
Share Ag News Via