We saw cattle prices fall heavily last week and with the release of the slaughter report, we get a feel for why. East Coast cattle slaughter last week hit a three year high and stronger levels were across the board.
Figure 1 shows the jump in cattle slaughter last week. The 5% lift took weekly cattle slaughter past the highs seen last May and 18.5% above the same week last year. For the year to date, east coast cattle slaughter has been 10% above last year.
Queensland has been the main driver of higher slaughter rates. Last week Queensland slaughter was up 25% on the same week last year. NSW was up 11% and Victoria up 11.5%. It would seem that a lack of summer rain, except for in the far north, has northern producers increasing turnoff rates.
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In southern NSW and Victoria, high feed costs are seeing producers offloading stock at a higher than normal rate. Figure 2 shows that it’s the states other than Queensland which are reaching new highs. Last autumn and winter, Queensland slaughter spent a couple of weeks higher than last week, but not by much.
Probably the most disturbing figures are female slaughter. Only reported for NSW and Queensland, last week they were up 50% and 60% respectively. For last week alone, just in NSW and Queensland, 22,000 head more females were slaughtered than in the same week last year.
With a drought which has lasted more than 12 months, it’s likely that females now being sent to slaughter are younger than normal cast for cattle and include plenty of heifers, which are still priced okay.
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Looking forward, MLA’s projections for 2019 slaughter sit at 7.6 million head. For the year to date, we estimate 1.26 million head have been slaughtered. This leaves 6.34 million head to be slaughtered for the rest of the year, which is 5% lower than the March to December levels for 2018. If there are going to be fewer cattle slaughtered this year, the decline in supply is going to have to come soon and be sustained.
Key points
* Weekly east coast cattle slaughter hit a 3 year high last week.
* Queensland, NSW and Victoria all have much higher slaughter rates than last year.
* Female slaughter is very strong, which points towards strong price improvements in autumn or winter.
What does this mean?
Heavy slaughter early in the year can be an indicator of what is to come. This year is likely to be different, but only when it rains. Figure 3 indicates how quickly things can turn. The red arrows on figure 3 shows May 2015 and 2016, when slaughter peaked for the year, before falling dramatically and not recovering for the remainder of the year.
The impact on price was obvious, and it can be expected again if autumn and winter rain are favourable.
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