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Thursday, 15 December 2016 07:02

Markets to ease - NAB

Beef producers have seen record prices this year but 2017 will see pressure from global fundamentals and a likely softening of re-stocker demand in response to drier weather, according to the latest National Australia Bank (NAB) Agribusiness In Focus: Beef and Cattle Outlook.

Key points:

  • NAB’s forecasts point to the Eastern Young Cattle Indicator (EYCI) falling to 500 AUc/kg in the September quarter 2017. This is an approximately 30% contraction from its peak in August this year, although it remains above the range of prices prior to 2015.
  • The initial phase of the prices boom was driven by US demand in the face of drought and high corn prices. These factors have now eased, and South American producers are more competitive, leading to Japan overtaking the US to once again become Australia’s biggest beef export destination.
  • In 2014, Australia supplied 45 per cent of imported beef to the Chinese market, but in the first eight months of 2016 this shrank to 19 per cent. This is due to a lack of price competitiveness and increased access by Uruguayan and Brazilian beef.
  • However, live export prices are strong and Darwin-Indonesia light steers traded near record prices in November.
  • High domestic prices this year have been driven almost exclusively by re-stocker interest. While re-stocking has been supported by a wet winter and spring, as the weather dries out there will be considerable risk to saleyard prices.
  • Meat & Livestock Australia’s latest cattle industry projections place the Australian herd at 26.14 million in 2016, the lowest since the mid-1990s. MLA expects supply available for slaughter to remain constrained over the coming months, but a return to drought conditions could put more supply on the market.
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