Agribusiness analysts say a meaningful drop of rain could send cattle prices through the roof, with the nation’s weather-ravaged herd at 20-year lows and therefore hypersensitive to any uptick in seasonal conditions.
The rolling east coast drought and flooding across northern Queensland has significantly reduced the Australian herd over the past couple of years, but Rabobank’s Australian 2019 Beef Cattle Seasonal Outlook says beef producers – as well as feedlots and processors – could witness a 20 per cent price lift if the regions get a decent drop.
However, should the season remain drier than normal, prices will ease and remain below 2018 levels.
Modelling predicts an Eastern Young Cattle Indicator of between $4.00/kg and $4.50/kg throughout 2019.
Seasonal Outlook author and Rabobank senior animal proteins analyst Angus Gidley-Baird said the cattle market was currently very sensitive to any changes in demand.
“While the model suggests prices will head lower this year, any rain that allows producers to hold onto their cattle or come back into the market to buy cattle, will see prices head one way – and that way is up,” Mr Gidley-Baird said.
“There is simply not enough cattle in the system and, coupled with strong export fundamentals, there is much upside for prices.”
Mr Gidley-Baird forecast cattle slaughter numbers to contract by five per cent in 2019 and yarding numbers shrink by another two per cent – assuming drier than average seasonal conditions.
He said the drop in production had been compounded by Queensland floods that affected an area that accounts for one million head of cattle, about 17 per cent of the state’s herd.
Rabobank said Australia’s key export markets are expected to remain strong amid increasing competition for the Korean and Japanese markets with the US.