Slaughter cows hit record high, the same week grinding meat sinks to 20-month low: What gives?
Jon Condon, BEEF Central (Australia)
October 16, 2020
The disconnect between cattle prices and export meat prices came sharply back into focus this week.
At the same time that cow prices have hit record highs in saleyards and over the hooks, grinding beef prices in key export markets have sink to 20-month lows.
As of Wednesday, some Queensland processor slaughter grids listed an unprecedented 590c/kg for heavy cows, suggesting a typical 330kg carcase weight animal would fetch just a little less than $2000. A month ago, identical cows were making 550-555c, and this time a year ago, around 500c. More updates on this week’s grid price movements in Tuesday’s weekly kill report.
Meat & Livestock Australia has this week reported similar price trends, including record highs, for saleyards cows.
The domestic cow market has found support in recent weeks as favourable conditions in the southern states have promoted the retention of breeding stock and tightened supplies. Prices have responded, with noticeable increases and some records set across saleyard and over-the-hooks indicators.
It reflects the lack of synch that Australian cattle prices, driven by low herd numbers and rebuilding after drought, currently have with world competitors.
At the same time as slaughter cows are hitting new record highs, export grinding meat values are sagging sharply.
The current weekly US imported 90CL grinding meat quote into the US, in A$ terms, is 621.9c/kg. That’s the lowest value seen since January 2019 – 21 months ago – and represents a 134c/kg or 18pc decline on prices seen this time last year.
The result of all this is eye-watering losses for processors currently slaughtering cows. And worth remembering, about 25pc of each grassfed export steer carcase also ends up in the same grassfed trim bin.
Large processors are always somewhat evasive about margins, but two large operators spoken to this morning suggested losses on slaughter cows this week are at least $250 a head. Some might be higher.
“We’ve never paid this sort of money previously for cows,” one large Queensland processor said this morning.
“The current losses we are writing would blow your hair back,” he said. “It’s as bad as I have seen in 25 years in the processing game, and it’s very difficult to see how everybody (processors) keeps going under these circumstances.”
He suggested that one of the key motivating factors among processors to ‘press on’ under such financial burden was in preserving their workforce, including skilled staff.
“Close now, and those staff drift away to other work, and it makes it virtually impossible to start up again with anything like a normal kill next year. It’s just a matter of who can survive at the moment. But nobody, regardless of size, can sustain losses at this level indefinitely.”
While there are big losses are being recorded on every beast killed at present, there are also the losses caused by dropping days, when no cattle are killed at all, the processor said.
“It doesn’t matter what is put across the hooks at the moment – the losses are horrific.”
Scarce numbers available ...
US meat prices retract ...