Strong processing capacity for Australia's cattle industry

Elders' business intelligence analyst Richard Koch says as many as 155,000 head a week can be processed if the cattle are there.

Transcript

00:00Cattle prices have opened strongly, but there are many, many factors at play at the moment.

00:05Elders analyst Richard Koch is joining us today.

00:08How do you see the market so far in 2025?

00:11It's been a positive start.

00:13I think the weaker Aussie dollar and rising international beef prices really underpin strong processing margins

00:20and that's flowed onto better cattle prices.

00:24In contrast to this time last year, where the processing sector was probably going okay,

00:30all the other sectors of the beef industry look to be pulling the same way this year.

00:35The feedlots look set up for a good year.

00:38Restocker activity started the year stronger, much stronger than it was this time last year.

00:44And the live cattle export industry, Indonesia's issued import permits already for 2025.

00:51So this time last year, they didn't really get going until the end of Feb.

00:54So the outlook looks pretty strong for all sectors.

00:57Absolutely. And what about producer sentiment?

01:01There are signs that the producer's confidence is rising.

01:05The restocker margin to feed the cattle has sort of gone back to normal for the steers.

01:11We're still seeing the heifers carry a wider discount than normal.

01:15So I think that will narrow up this year.

01:18And I think the heifers is where the opportunities lie at the moment.

01:22So if you've got heifers at the moment, should you hang on to them for a bit longer, do you think?

01:26Well, obviously it depends on your feed availability, etc.

01:31But looking at the markets, I think that they look to me to be moving in a positive direction in 2025.

01:38So yeah, anything that you can do to increase your production probably is going to all go well for you this year.

01:45The producers should get a lot of confidence in this.

01:47Posting capacities, you know, compared to the back in the 23, when we had the big crash in prices,

01:56the processors were just getting back to normal from COVID.

02:01Posting capacity was probably running at about 130,000 head per week.

02:06The processors have worked really hard to build that capacity through 24.

02:10You know, they've taken on more staff.

02:13There's been new plants open.

02:15We think processing capacity this year should be circa about 155,000 a week.

02:21Wow.

02:22You know, so that's 20 to 25,000 head of cattle in demand that we've improved from the back end of 23 to now.

02:31So that just shows you that the industry is growing and the processors have been willing to invest.

02:37They see a good future in the industry.

02:40At 155,000 head per week, that would be a record slaughter level in a period where, you know, there's not a drought or anything like that.

02:49So that's just a business as usual capacity figure.

02:53And that just shows you that the industry is growing and it's underpinned.

02:58Incredible, really.

03:00And as you say, this should provide basis for a lot of optimism.