Relating cattle supply to price

The herd is predicted to say no marginally to the center of 2026, with the tempo of herd discount to extend by way of 2027 and 2028 (determine 1).  Driving the decline within the herd could be very excessive slaughter charges in 2026, which have been sturdy already and are anticipated to proceed. 

The rise in slaughter in 2026 is forecast to be 2%, accounting for an additional 172,000 head.  A 2% enhance in slaughter in itself is unlikely to be massive sufficient to precipitate a 2.6% decline within the herd in 2027 however there’s prone to be some decline in productiveness within the north after a few bumper years.

What about costs?  Falling numbers of cattle for slaughter ought to imply stronger costs in 2027 and 2028.  Not essentially. Within the lamb demand article, we confirmed a powerful linear relationship between lamb slaughter and lamb costs.  This doesn’t exist in cattle, however a few years in the past we discovered one other relationship.

Cattle slaughter in Australia is tied to the premium or low cost of the Jap Younger Cattle Indicator (EYCI) to export beef costs.  Determine 2 reveals annual cattle slaughter on the x axis, and the typical annual unfold of the EYCI to the 90CL. 

The connection was once fairly tight, however in submit Covid years it has blown out with massive swings in export costs and cattle slaughter bottlenecks, particularly in 2023.  Cattle costs are nonetheless closely discounted to the 90CL, however with increasing slaughter capability lately, there’s some hope of the unfold returning to the outdated relationship. 

If that had been the case, slaughter of 8 million head in 2028 would equate to an EYCI low cost of fifty¢ to the 90CL Indicator.  On the present 90CL price this could give an EYCI of 1100¢/kg or extra.