WA cattle producers optimistic as record prices set to continue

Record cattle prices have put a smile on farmers’ faces but caused angst for abattoirs and exporters, with much of Australia’s beef supply chain bracing for another turbulent year ahead. Australia’s cattle price benchmark, the Eastern Young Cattle Indicator, repeatedly broke its own record last year, surging above 1000¢/kg for the first time in history in July before closing 2021 at an all-time high of 1169¢/kg. Its WA counterpart, the WYCI, followed a similar trajectory, peaking at a record 1187¢/kg in October and closing 2021 at 1099¢/kg. For Benalong Grazing’s Lewis Roe — whose family run 700 angus breeders across a 1905ha farm near Gingin — things are certainly looking up. Lewis, 25, said surging prices and demand had allowed many businesses, including theirs, a rare chance to re-invest in capital and farm infrastructure. “For a long time, I think everyone was held back from doing that because they just didn’t have that spare money,” he said. “At the moment you’ve just got to enjoy having prices the way they are and improve your business while you can. “In the last five years, I can think of almost 10 new sets of cattle yards being built, and I know probably six or seven people who’ve bought a new seeder. “That sets you up for the next 10 to 15 years, so it’s been a pretty good time to be in the industry.” Lewis — who runs the farm with his brothers, Will and Fred, and father David — said all cattle producers in the area had had a good season. “We had a nice soft finish, which means that we had green feed a little bit longer this season, so our calves had a little bit more weight in them — maybe another 10kg or 15kg,” he said. Will, 27, said the average sale price of Benalong steer calves had increased about 40 per cent over the past year. “That’s obviously a huge jump. We were over the moon with the prices last year, so to get another 40 per cent on top of that, we are extremely pleased,” he said. While he never expected prices to reach their current level, Will said he expected they would remain strong for a while yet. “We’re feeling pretty optimistic about the next year, and we’ve just got to hope we get a bit of rain and grow a bit of feed,” he said. “Without having a crystal ball, I think prices are going to hold for the next year, and after that I’d hazard a guess there’s probably going to be a correction . . . as the herd builds up again.” Driving upward prices is a major national herd rebuild that comes after several years of drought-induced destocking saw Australia’s cattle herd hit a record low of 24.6 million head in 2020, according to Meat and Livestock Australia. MLA market analyst Stephen Bignell said good rains across most major cattle regions in 2021 had prompted the rebuild. “Producers were retaining stock for breeding purposes, translating to less cattle being available for the market,” he explained. “Simultaneously, demand for cattle was high as producers looked to put cattle on the abundant feed they had.” But in good news for consumers, skyrocketing cattle prices have had minimal impact on supermarket shelves. Mr Bignell said while the same drivers pushing cattle prices up were putting pressure on the retail price of beef, the latter was not rising at anywhere near the same rate. He said it was abattoirs, rather than consumers, feeling the full force of the pinch. “Since 2019 at least, the price of cattle at a saleyard level has increased 200 per cent . . . but that hasn’t flowed through fully to retail prices,” Mr Bignell said. “The most recent inflation figures show (the price of) beef has risen by 10.9 per cent in the past 12 months. “Beef processors (abattoirs) are the ones whose margins have been getting squeezed.” WA-based analyst and Agora Livestock founder Rob Kelly said while pressure from supermarkets had slowed rising prices at the checkout, they would eventually hit a breaking point. “There’s no reason it can’t keep going higher, but it will get to the point where we start to see red meat consumption really decline at the expense of cheaper proteins like chicken and pork,” he said. “We know this already. For example, people aren’t buying big lamb roasts for the weekend any more; they buy sausages because it’s just too expensive.” According to modelling by Thomas Elder Markets, Australian abattoirs lost an average margin of $326 per head of cattle slaughtered in 2021. Mr Kelly said current prices were unsustainable but he did not expect them to stop rising anytime soon. “The big factor for 2022 . . . is how long can cattle processors continue to operate at such poor margins,” he said. “The issue for them is if they stop buying they’ll lose even more money by not operating at all, because their fixed costs are so high.” Mr Bignell, on the other hand, said the main issue going into 2022 would be freight and logistics. “Exporters are experiencing global shipping delays and congestion, on top of escalating shipping rates,” he said.