Prices for Australian lean beef in the US market firmed strongly throughout the past few months with manufacturing beef prices almost the equivalent of fed beef prices, Elders analyst Richard Koch says in his latest August cattle market outlook.

“Australian cow processing margins remain strong, which should underpin local cow values in coming months,” he said.

The main risk to the maintenance of current cow and manufacturing beef prices was competition from South American beef, he said.

“ For the past month South American suppliers have shifted their export focus towards the United States market, owing to better returns – even after paying the 26.4pc tariff that currently applies on Brazilian imported beef.”

It was hoped that lower Chinese beef imports during July would help China to reduce its beef stocks and allow for a recovery in Chinese domestic beef prices, Mr Koch said.

The narrowing in price between slaughter cows and grass heavy steers has been captured in Beef Central’s recent weekly kill reports.   

This chart is a relative measure of the strength of local cow processing margins

Cattle market performs strongly

The Australian cattle market had performed strongly over past month, led higher by export cattle categories as demand from the northern hemisphere strengthened seasonally, Mr Koch said.

“Heavy steers and cows are now trading at levels of early 2023 having recovered the losses of the past 18 months. Markets remained well supplied (slaughter remains high +16pc on last year and +13pc on the five-year average) which is testament to the strength of demand,” he said.

Feeder and restocker steer values had been a little slower to recover, but are starting to gain momentum owing to their relative attractiveness compared to finished cattle prices.

“Over the next few months, we transition to a period of weaker demand in the northern hemisphere as the summer grilling season ends and temperatures cool. This is also a period of higher US cow slaughter,” Mr Koch said.

“US feedlots remain heavily supplied with market ready cattle while South American suppliers have started to pivot away from China to the US which may signal a cooling in demand from China.”

In the past few days there had been global economic growth jitters with corporate earnings on the slide and heightened volatility in asset markets.

“There are signs that some of our more price-sensitive markets (ie. live cattle exports) are starting to baulk at the recent price hikes,” he said.

“On the positive side, while the next few months we may see some softening in international demand from current levels (beef exports were extremely strong in July), we should soon get a reprieve from heavy supply.

Elders national livestock manager Peter Homann reported that “there is virtually no cattle with any weight in the south (there is a green drought across western Victoria and parts of South Australia), while northern operators are currently finishing their second muster and we should start to see supply ease toward the end of September.”

So, this combined with a weaker $A should see cattle values at least maintained at current levels through the end of 2024, Mr Koch said.

Click here to access Elders August cattle market outlook