- Since 2018 the cost of cattle has risen by 60-80% while export values have only gained 30-40%.
- The average processor margin dipped $20 from July to August to register a loss of $324 per head of cattle processed on the month.
- The annual average processor margin for 2021 sits at a loss per head of $300.
Beef export prices have been improving as concerns over a global tightening in supply and trade disruptions to the largest beef exporter, Brazil, due to a mad cow outbreak. Increased beef export values add revenue back to the Australian beef processor’s bottom line and margins are particularly influenced by export pricing changes as more than 70% of Aussie beef product is destined for the offshore market.
Unfortunately for the Australian beef processing sector the local price of cattle, which are an input cost to the processor, continue to outperform beef export price movements. An index of cattle prices (EYCI and Heavy Steer) versus a selection of average beef export values to Japan and the USA highlights that since 2018 the cost of cattle has risen by 60-80% while export values have only gained 30-40%.
During August local cattle prices, for cattle types used as inputs to the processor model, increased nearly 3% while average beef export prices only gained 2%, on average. Co-product prices lifted around 1% too, but this wasn’t enough to see the beef processor margins improve.
The average processor margin dipped $20 from July to August to register a loss of $324 per head of cattle processed on the month. The deterioration of the processor bottom line dragging the average annual processor margin to a $300 loss for the 2021 season, thus far.