Beef cattle market: Super demand cycle close
AUSTRALIAN cattle prices will continue to fall, but the landing will be “soft”, according to Simon Quilty.
An independent meat and livestock analyst who co-founded Reimann, the electronic trade platform, Mr Quilty says demand will take the sting out of oversupply in the beef cattle market.
He believes global beef markets are moving into a super demand cycle — where prices rise as supply increases — for the fifth time in the past 25 years.
But this time around, a booming Asian middle class will mean super demand could extend the usual two-year cycle out to a five to seven-year-cycle.
Globally, beef is seeing a sustained period of demand unlike it has seen before, Mr Quilty said, and at the same time key demand countries China, Japan and South Korea have lost 10 million cattle out of their domestic herd in the past decade.
And of the next billion people to enter the middle class, 88 per cent of them will be Asian, he said.
“First thing middle class do when they get into the new area is they don’t buy pork or chicken, they buy beef and seafood because it is the wealthy thing to do,” he said.
Despite strong demand, Australia’s cattle cycle has to go through a recession as it rebuilds.
“October next year will be the low in the market no matter what — each time the herd gets to a certain stage of rebuilding numbers increase and prices decrease,” Mr Quilty said.
“When you compare global prices against Australian prices … we are 21 per cent overpriced.”
“To come back in line we need a correction that would see the Eastern Young Cattle Indicator fall to 430c/kg.”
Producers should look at this forecast of softer prices as an opportunity, as rates would likely then rise to between 550-600c/kg, Mr Quilty said.
He also warned producers not to ignore the Indian market, which exported 1.3 million tonnes this year, and would be up to 2.5 million by 2025.
He said India sent 56,000 tonnes of buffalo beef into Indonesia last year, and it was displacing Australian cattle and processed beef.
“I don’t think that problem is going away, I think the Indian beef in that market will continue to get even bigger, and we need to take the attitude that Indonesia was once a good market, but we need to move on, we need to find a new Indonesia and it is probably China, where the continued growth in live cattle export and meat demand is,” he said.