Thursday, April 25, 2024

ANALYST INTEL: Drought could hamper Aussie’s beef rebuild

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New Zealand farmers have been looking over at the Australian farmgate beef prices with envy this season.
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New Zealand farmers have been looking over at the Australian farmgate beef prices with envy this season. 

Prolonged drought has cut back Australian livestock numbers and pushed the competition for cattle procurement to fever pitch. Most classes of cattle can earn beyond AUD$7/kgCW at the processors and certified grass-fed steers can achieve AUD$8/kgCW. 

For most regions of Australia this is coinciding with a good growing season and competing with herd rebuilding efforts.

However, not all of Australia is so lucky. 

The majority (65%) of the state of Queensland remains in drought. Rainfall deficits baked in by the 2017-2019 drought mean that groundwater levels are low despite a reasonably wet winter. This means that in some areas stock water is an issue. And, while some patches are managing average grass growth according to Queensland Government statistics, much of south-east Queensland is listed at “extremely low” pasture growth rates.

It’s going to take quite a bit of rain to remedy the situation. There is some hope on the horizon. The Bureau of Meteorology predicts a La Nina season that will bring above median rainfall for Queensland for October to December. 

It’s not nothing, but the median rainfall totals for this three-month period are low compared to NZ. Most regions have a median rainfall of 60-100mm from October to December. So, the prospects of good, game changing rainfall is not locked in. 

A forecast of 50mm of rain for southern Queensland for this week has some hoping for an early start to the “wet season”. But farmers usually have to wait until November for the wet season to kick off.

While parts of Queensland continue the nervous wait for drought-busting rain, there is a question mark hanging over Australia’s beef production. 

Queensland is the beef powerhouse of Australia, providing nearly half of all Australian beef. The drought-affected areas of Central and Southern Queensland are key areas for grazing and feedlot cattle, making up around 35% of total Australian beef production.

While no one can take too much joy from watching farmers battle through a drought, NZ has enjoyed the lack of competition from Australian beef in our major markets. This has been partially responsible for driving beef export returns up to record levels for this time of the year.

But regular readers of the AgriHQ reports know that it’s not all plain sailing for this season’s beef outlook. 

While there is plenty of cause for optimism, there are still significant risks as we head into the new season.

Covid-19 outbreaks continue to harass our major markets, threatening high-end consumption in restaurants, hotels and travel-related food services. In addition, sea freight remains an absolute headache. 

This has the potential to upset cattle processing, particularly for prime cattle, if outgoing beef clogs up NZ cold stores due to shipping delays. 

Processors are pedalling hard to keep that from happening as evident in the high beef export volumes over the off-season. In some cases processors have diversified into chartering their own ships to keep their inventories under control.

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