After a period of significant flock and herd rebuilding, Australia's beef herd and sheep flock have now officially entered a destocking phase.
The report, issued by Meat and Livestock Australia (MLA), is based on figures released by the Australian Bureau of Statistics for the third quarter of 2023, which help to inform the industry’s operating environment.
Starting with cattle first, the cattle slaughter in Q3 increased by 11% on Q2 levels and a sizeable 23% on Q3 2022 to reach 1.91m head. MLA reports that this is the highest cattle slaughter since Q1 of 2020.
According to global supply analyst Tim Jackson: "Slaughter lifted in every state, with the biggest increase in South Australia (48% from Q2), and the smallest increase in Western Australia (4% from Q2)."
The destocking statistic is partly based on an analysis of the type of animals being drafted for slaughter. Male cattle slaughterings in Q3 2023 increased by 8% versus Q2 and were recorded at 974,000 head, while female slaughter rose by 13% to 936,000 head.
MLA explains that the higher number of females slaughtered increased the female slaughter rate (FSR) to 49% for Q3 and 47% for the year to date.
The high female kill is seen as evidence that the cattle herd has now entered a destocking phase, with farmers drafting heifers and cows which would otherwise have been retained for breeding.
Grass-fed cattle slaughtered
Furthermore, MLA explains that the increase in slaughter figures was largely driven by greater drafting of grass-fed cattle. Figures presented state that grass-fed cattle throughput increased by 24% to 1.29m head.
During the same period, drafting of feedlot cattle fell by 10% to 689,000, equating to grass-fed cattle making up 68% of the kill. This is highlighted as the largest percentage of total slaughter since 2015.
Pasture conditions have improved in recent years, lifting the percentage of cattle finished off grass. but the figure is well above the norm and signals that cattle which were likely not destined for slaughter are now being drafted.
In addition, the average carcase weight of cattle reduced by 1.1kg to 309kg, which MLA attributes to an increase in cow and heifer slaughterings and light cattle stemming from greater drafting of grass-finished cattle.
The increase in slaughter has driven a 20% year-on-year increase in beef production to 589,406t for the quarter, the largest quarter since Q4 2019.
A higher availability of beef is fuelling higher exports, with volumes moving in Q3 rising by 20% year on year to 409,908t, while domestic consumption rise by 7% to 179,498t - the highest level since 2018.
Australian cattle prices are currently at their lowest position in nine years. Reuters reports that prices of cattle raised for beef production fell from between A$3.50 and A$7 per kilo (€2.12/kg to €4.23/kg liveweight) in 2021 to between A$1.40 and A$2.20 (€0.85/kg to €1.24/kg liveweight) by October 2023.
The report shows that lamb slaughterings of some 6.58m head lifted by 9% compared with Q2 of 2023 and by 20% on Q3 2022.
To put the scale of the increase in context, it is the highest quarterly kill on record. The sheep slaughter (cull ewes, rams, mature wethers, etc) fell 18% from Q2 when high numbers were culled, but, at 2.09m head, is running 35% ahead of Q3 in 2022.
The stock turn-off ratio (STR) is the measurement used to denote destocking and MLA states that, at in excess of 11%, it was just above the threshold for a flock destock.
The industry body adds that this is likely understating the actual extent of destocking, as it has nearly all come from slaughter and significant numbers are also leaving farms live. Live export volumes for Q3 were recorded at 62,580t, down 72% on Q2 in 2023.
High carcase weights
Lamb carcase weights were unchanged compared with Q2 at an average of 24.4kg, while sheep carcase weights increased by 2kg to 25.9kg.
Carcase weights of lambs varied between states from 22.2kg in Queensland to 25.6kg in New South Wales and South Australia, with feed supply contributing, along with delays in some areas to get lambs moving for slaughter, such was the pressure on throughput.
The high levels of throughput, combined with strong carcase weights, have fuelled higher production. Australian lamb production in Q3 increased by 16% to 160,954t, with year-to-date production running 10% higher at 446,000t.
Mutton production of 54,189t in Q3 was 30% higher year on year. 2022 was a record year for Australian production, but given the high levels of production already recorded and the fact that slaughterings remain high, MLA is forecasting a new record for sheep throughput in 2023.
Similar to beef, domestic consumption of lamb increased in Q3 and is running 12% higher at 60,544t. The low level of consumption relative to export volumes shows how reliant the Australian sheep sector is on global markets.
Lamb consumption for the year to date is running 10% higher, the highest level since 2016.
There is no doubt that a higher availability of lower-cost product has fed into increased consumption.
Lamb prices have improved somewhat in recent weeks, with MLA recording an average price of €3.30/kg equivalent for heavy lambs. This is €1.42/kg lower than in 2022, with light lambs well under €3/kg at the equivalent of €2.70/kg.
Mutton prices are running at the equivalent of just €1.20/kg.
The report does not take account of unexpected rainfall in recent weeks inserting some optimism into markets. This is lifting prices for restocker (store) cattle, while MLA reports there is less urgency on some sheep farmers to continue culling adult sheep at the same rate.
It is felt that in addition to rain and potentially lower production costs, improved farmgate returns will be required to reverse recent trends and return optimism to the sector.