The Meat and Livestock Australia (MLA) Cattle Industry projections were released last week. The Industry Projections are an important outlook for cattle supply, being herd and slaughter, along with estimates on things like exports and live export, so it should be easy to work out a what prices will do. Not really.
The herd is expected to decline marginally to the middle of 2026, with the pace of herd reduction to increase through 2027 and 2028 (figure 1). Driving the decline in the herd is very high slaughter rates in 2026, which have been strong already and are expected to continue.
The increase in slaughter in 2026 is forecast to be 2%, accounting for an extra 172,000 head. A 2% increase in slaughter in itself is unlikely to be large enough to precipitate a 2.6% decline in the herd in 2027 but there is likely to be some decline in productivity in the north after a couple of bumper years.
What about prices? Falling numbers of cattle for slaughter should mean stronger prices in 2027 and 2028. Not necessarily. There is a strong linear relationship between lamb slaughter and lamb prices. This doesn’t exist in cattle, but many years ago we found another relationship.
Cattle slaughter in Australia is tied to the premium or discount of the Eastern Young Cattle Indicator (EYCI) to export beef prices. Figure 2 shows annual cattle slaughter on the x axis, and the average annual spread of the EYCI to the 90CL.
The relationship used to be quite tight, but in post Covid years it has blown out with big swings in export prices and cattle slaughter bottlenecks, especially in 2023. Cattle prices are still heavily discounted to the 90CL, but with expanding slaughter capacity in recent years, there is some hope of the spread returning to the old relationship.
If that were the case, slaughter of 8 million head in 2028 would equate to an EYCI discount of 50¢ to the 90CL Indicator. At the current 90CL rate this would give an EYCI of 1100¢/kg or more.
There are a lot of variables in this analysis. Cattle slaughter may not decline if productivity is maintained. The spread in figure 2 may not return to the old level due to the increased energy and labour costs since we were there last. And the season may not be kind.