Cattle future looks bright

MLA's chief market analyst Peter Weeks said that the past year had been a most difficult one for the cattle and beef industries, with widespread losses reported for cattle producers (particularly in southern drought areas), lot feeders and processors/exporters.

The principal causes for the losses were the severe and prolonged drought, record grain costs, a rising Australian dollar, the partial return of the US to Japanese and Korean beef markets and weaker US import demand.

"It is a testament to the resilience and professionalism of cattle producers today that the Australian cattle herd remains above 28 million head - which is above the pre-drought 2002 level - and feedlot capacity is at a record 1.15 million head despite these difficulties," Mr Weeks said.

"Australia's cattle producers have proven their credentials as worthy custodians of the land, through the adoption of a wide range of initiatives to not only manage drought, but to improve the nation's production capacity during extended and severe dry periods.

"As the drought recedes, cattle producer incomes are set to recover to attractive levels and will be driven by improved on-farm productivity, the elimination of drought related costs, better local grain availability and some easing in grain costs.

"Also, prices for breeding stock, cows, heifers, calves and bulls are expected to rise in 2008, as producers move into herd rebuilding. We are predicting a stabilisation of cattle numbers at 28.3 million head by June 2008, before expanding by around 2 percent in 2008-09 and 2009-10.

"Prices for young cattle should also be boosted by stronger restocker and feedlot demand, though they will be capped by the ongoing high global grain costs and only partial restoration in feedlot activity.

"While supplies of Japan ox and medium weight steers are expected to be tighter in 2008 -and especially for grainfed animals - prices for these categories may fall further as US competition intensifies in North Asia."