MLA points to multiple reasons for cattle price drop

Source: MLA Photo by Ripley Atkinson

Supply, mixed quality, labour shortages and seasonal fluctuations are having as much — if not more — effect on cattle prices than fears about foot and mouth disease, according to Meat & Livestock Australia.

“Firstly, it is important to note that Australia does not have (FMD or lumpy skin disease) on its shores,” MLA managing director Jason Strong said.

“However, clearly there is a heightened concern about the impact a potential incursion may have on our industry and this speculative angst is making its way to the saleyards.

“If we put this aside, there are a number of other sophisticated and tangible market forces putting downward pressure on market prices.

“These can be broken down into two key categories: on-farm and in the processing sector.”

On-farm drivers include supply, mixed quality of livestock presented to market and the fact that the market is performing in typical winter fashion.

With a comparatively wet and colder winter, the mixed quality of cattle supplied into the system is also impacting the price.

Mr Strong said in the processing sector, softer processor grid prices were affecting livestock markets as processors faced multiple challenges including absenteeism due to COVID-19 and influenza, as well as reduced processor capacity due to labour shortages.

“As processors work through these challenges, there is reduced demand between buyers at the saleyards,” he said.

“It is also worth noting that the price reduction is off an all-time price high of 1191¢/kg cwt earlier this year, and although prices have fallen, we are still sitting 22 per cent higher than the five-year average.”

Mr Strong said while market prices had fallen, bringing these prices into perspective by taking a broader long-term view on their performance was critical.

“In the second half of 2021, cattle prices continually reached record levels.

“Comparing current market performance to year-ago levels does not paint an accurate picture of performance after they have softened from such high prices.”

As of July 27, cattle market prices compared to the five-year and 10-year (see table) averages demonstrated the comparative strength of the market.