Cattle prices are expected to ease during 2018 before stabilising at a level higher than the five-year average, according to Rural Bank’s new Australian Cattle Annual Review.
Despite the Eastern Young Cattle Indicator (EYCI) averaging almost four per cent lower than the record high cattle prices recorded across all states in 2016, domestic and export demand for beef remains strong.
Andrew Smith, General Manager Agribusiness for Rural Bank, said that with production expected to increase further in 2018 – in line with an expanded herd and increased average carcass weights – the short term price outlook will likely depend on rainfall levels.
“The recent revival in demand after October 2017 rain is likely to provide some support to prices for the remainder of 2017, and should ensure they settle approximately 30 per cent higher than the five-year average.
“However, if average rainfall isn’t received over the coming weeks, we expect to see restocker demand ease, and a potentially higher turn-off through the summer months which will in turn put downward pressure on prices,” Mr Smith said.
With the Bureau of Meteorology’s three month outlook now suggesting there is a 50 per cent chance median rainfall will be exceeded across most of Australia, restocking activity could continue for the rest of 2017 and contribute to a national herd increase for the second consecutive year.
The Australian cattle herd increased by an estimated 3.6 per cent in 2016/17.
“This increase in production is expected to result in a growth in exports, tapping into increasing global demand for beef driven by key markets such as China, Japan and South Korea.
“With Australian exports trending 13 per cent higher than 2016 in volume, exports look set to increase again in 2018 and in the years to come as production continues to grow. While import demand from Australia’s top four export markets is forecast to increase five per cent in 2018, competition for market share will continue to be intense,” Mr Smith concluded.
According to the new report, production and export trends from the US are producing some headwinds for Australian beef with market share in Japan and South Korea returning to the US at the expense of Australia.
To date, increased international production has kept prices in export markets relatively low compared to Australian cattle prices and should this continue as expected, further declines in Australian cattle prices are inevitable. However, in the short term, restocker demand and stock retention should provide support for cattle prices for the remainder of 2017 before a likely decline in 2018.
The new Annual Review, launched by Rural Bank’ specialist insights team – Ag Answers – provides producers and industry with a concise analysis of the Australian cattle and beef sector, with data and outlooks on national and international beef production, seasonal conditions, prices and demand.
Source: Rural Bank