While domestic cattle prices have come “off the boil”, they are expected to still “simmer nicely” during 2018 with producers expected to enjoy a profitable year ahead, according to a new industry report.
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In its just-released Australian 2018 Beef Cattle Seasonal Outlook, Rabobank agribusiness specialist Angus Gidley-Baird said a combination of increased cattle supply, reduced producer demand and weaker global prices should ease back domestic cattle prices from the highs reached in 2017 to stabilise at just above five-year averages.
Cattle slaughter numbers are expected to rise marginally and overall Australian beef production to increase by three per cent for the year.
Mr Gidley-Baird said producers’ incomes would generally be lower in 2018 because the small rise in production would be offset by cattle price declines but the outlook for Australia’s beef producers was still for an overall profitable 2018.
However four watch factors could alter the “shape of the year” and impact upon the fortunes of Australia’s beef sector, he cautioned.
These were the possibility of a big, early Queensland wet season, fierce competition in Asian export markets, rapid growth in Chinese demand for live exports and increased cow slaughter in the United States.
Mr Gidley-Baird said Australian beef production was forecast to rise slightly as the herd rebuild continued.
“After falling by 1.7 per cent to 7.16 million head in 2017, we expect cattle slaughter to rise slightly in 2018, with herd rebuilding over the previous two years in southern states now expected to start generating increased turn off,” he said.
The bank expects average slaughter weights – which have increased over the past three years with good seasonal conditions and a higher number of cattle on feed – to remain high.
“We expect the number of cattle on feed to remain high and, with lower cow kill and heavier grass-fed cattle weights due to the better seasons, this should result in an overall increase in production of three per cent,” Mr Gidley-Baird said.
While Australia’s key beef export markets are expected to remain strong, competition was also increasing and would “limit price upsides”, the report said. Mr Gidley-Baird said with the forecast increase in Australian beef production, exports were set to rise slightly in 2018.
“Japan, the US, South Korea and China will remain key markets. However, we will see increased competition from other exporting nations in all these markets,” he said.
A softening Australian dollar, particularly in the second half of the year – Rabobank’s 12-month forecast is 0.75 US cents – should at least assist Australia’s competitive position, Mr Gidley-Baird said.
