Market Morsel: Processors prepare for another tough season

Livestock | 20th January 2021 | By Matt Dalgleish

Market Morsel

After a spending much of the later half of 2020 with margin losses exceeding $200 per head of cattle processed there was a slight improvement to processor margins in December. The TEM theoretical beef processor margin model posted an average loss of $189 per head for the final month of the year to bring the annual average margin to a loss of $129 for the 2020 season.

The 2020 annual average loss mirrors the $129 loss achieved during 2016 and the $121 annual average loss experienced in 2017. While the 2020 seasonal pattern was similar to the pattern seen in 2016, the pattern set during 2017 showed a gradual improvement in monthly margins as the season progressed.

Analysis of annual cattle slaughter volumes to the annual average margin shows a good degree of correlation between the two series, with low slaughter volumes often pushing margins into negative territory. A forecast slaughter of 6.9 million head for 2021 suggests another tough year is in store for beef processors with a linear line of best fit suggesting that an annual average loss of $80 is on the cards.

Tags

  • Beef
  • Cattle
  • Processing
  • Margins