Cattle numbers provide basis for beef production to rise in the second half of 2022

Consumer demand is expected to remain firm, while restocker demand is strong but overall cattle prices could marginally ease in second term of 2022

Beef production is on the rise while restocker demand is expected to remain strong but it is expected cattle prices longer term could be softer

Local beef production is forecast to increase by 4.5% during 2022 according to Meat and Livestock Australia (MLA), as reported in the Rural Bank’s Australian agriculture mid-year outlook.

This result is expected to come from a herd of 27.6 million head, up 5.6% on last year.

Production is set to rise in the second half of the year following a tight first half of 2022 when average weekly slaughter for the year-to-date was 6.6% lower than 2021 and 32% less than 2020.

Favourable seasonal conditions and reduced supply chain disruptions will support increased slaughter rates although they will remain below average levels.

Meanwhile, global beef production is forecast to rise by one per cent during 2022, according to the United States Department of Agriculture (USDA).

Growth in production from Australia, Brazil and India will support the rise in global supply for the year and more than offset a fall in the US beef levels. Strong cattle availability and improved slaughter profitability will boost Brazil’s production by around 4% in 2022, according to the USDA.

Demand is there

Restocker demand is likely to remain firm for the remainder of 2022 following a strong first half of the year with a favourable weather outlook over the next three months providing good availability of pasture across the majority of cattle regions.

Food service demand is also expected to continue rising throughout the next six months as the effects of COVID-19 restrictions are minimal.

Left: Monthly average EYCI values forecast at 68% confidence interval. Source: Meat and Livestock Australia (MLA), Rural Bank. Right: January to May beef exports show year-on-year declines to all major markets. Source: Department of Agriculture, Water and the Environment

Australian beef exports are expected to increase throughout the rest of the year and are forecast to be marginally firmer than 2021 on the back of a rise in beef production.

Australia’s exports to China, Japan, South Korea, and the US have been lower than last year during the first half of 2022 but are anticipated to increase due to improved supply and demand. US production is set to decline by one per cent with exports falling by 4% for

the rest of the year as ongoing drought conditions take their toll.

This fall in exports will decrease the competition Australian exporters have with US exporters into China, Japan, and South Korea. However, the ongoing export suspensions China has implemented on several Australian abattoirs are likely to continue limiting export growth.

Price under pressure

Local cattle prices are expected to marginally decline in the second half of 2022 after multiple years of firm growth with an expected increase in Australian cattle supply likely to apply some downwards pressure on values.

On the other hand, ongoing strong restocker demand will continue providing support for prices across the next six months. The supporting factors for Australian cattle prices are unlikely to outweigh the rise in global supply, resulting in a marginal decline in cattle prices for the remainder of the year.

Foot and mouth disease (FMD) has been identified in Indonesia which raises the risk of an outbreak in Australia.

The impact of an FMD outbreak on Australian livestock industries would be severe with potential damage estimated at $80 billion by the Australian Bureau of Agricultural and Resource Economics.

Australia’s biosecurity system has kept FMD out of the country since the last outbreak occurred in 1872.