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By Angus Brown | Source: MLA
Cattle slaughter has been running ahead of year earlier levels for the best part of two years. While that trend has continued into winter, the driving states have changed somewhat. Northern slaughter has come back, while southern states are running higher than normal.
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The weekly east coast slaughter numbers quoted by Meat and Livestock Australia (MLA) have been strong for most of the last two years. While cattle slaughter has opened up a bit lower than before the long weekend, it remained 3% above the same week last year.
Normally, during dry times, and especially in winter, cattle slaughter is driven by Queensland and New South Wales. While the two northern states are still the largest slaughter states, it has been Victoria and South Australia which have been killing more cattle in recent times.
Figure 1 shows Victorian slaughter was last week nearly 10% above the same week last year, and year to date slaughter is up 8.5%. In fact, year to date slaughter has only been higher in Victoria in the drought years of 2014 and 2015.
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The situation in South Australia is a little different. The closure of the Murray Bridge works in January 2018 has SA year to date slaughter running 24% below the five year average, but it has picked up this year. SA slaughter for the year to date is up 16% on last year, showing some capacity is returning.
There are generally not many finished cattle around in the south at this time of year, especially off grass after a series of tight seasons. The cattle on feed data does give us a good idea of where the extra cattle have come from.
Figure 3 shows a rapid rise in Victorian and SA cattle on feed over the last year. Combined numbers of cattle on feed in March were 26% higher than March 2018, which equates to nearly 25,000 head. The extra cattle on feed equates to around 2,000 head per week over a quarter, so it doesn’t account for all the rise in slaughter. Victoria and SA slaughter has been averaging 5000-6000 head more for the year to date.
Key points
* Stronger east coast cattle slaughter has been driven by southern states in recent times.
* Increased feedlot inventories have helped prop up slaughter, but there is likely to still be herd liquidation.
* Increased southern slaughter will add to tight supply worries and price pressure in the coming year.
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What does this mean?
Increased feedlot supplies are propping up southern cattle slaughter to an extent, but it appears there is still some herd liquidation going on in the south. There is plenty of anecdotal evidence of dairy herds making their way to works with the tough summer and autumn, and high feed costs squeezing margins.
There has been similar pressure on beef herds, and this is likely to have helped prop up slaughter in recent months. We often say stronger cattle slaughter is good news for prices down the track. In this case the theory holds, with stronger southern slaughter adding to nearly two years of higher slaughter in the north.
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