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Cattle in Australia Set to Advance as Floods Shrink Supplies

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Jan. 31 (Bloomberg) -- Cattle prices in Australia may extend gains from the lowest level in three years as floodwaters boost grass growth, prompting farmers to retain animals, said Australian Agricultural Co., the nation’s biggest beef producer.

“Traditionally when you have rains like that, we go about maximizing the growth of the animals instead of taking the animal to market,” Chief Executive Officer David Farley said in a conference call today. Prices have jumped 7.3 percent since slumping to the three-year low on Jan. 15.

Floodwaters in eastern Australia retreated and cleanup crews moved in after ex-tropical cyclone Oswald forced thousands of people to flee their homes. The country’s cattle herd stood at 29.5 million head at June 30, 2012 the highest since 1977, according to Meat & Livestock Australia. Beef exports may gain 3.2 percent this year, boosted by shipments to the U.S., where animals were culled and processing plants were shut after a drought lifted feed costs, said the Sydney-based industry group.

The Eastern Young Cattle Indicator, which measures prices at sales in the nation’s east, climbed 1.2 percent to A$3.335 ($3.46) a kilogram today after declining to A$3.108 on Jan. 15, the lowest since January 2010. The price may average A$3.15 a kilogram in the first quarter, rising to A$3.30 in the second and A$3.70 in the fourth quarter, according to Luke Mathews, a commodity strategist at Commonwealth Bank of Australia.

“The amount of rain now should tighten supply for the next four to five months,” Farley said. Australia, the world’s third-largest beef exporter, is poised to benefit from declining supplies in the U.S., he said.

U.S. Beef

The U.S. herd dropped to 97.8 million head as of July 1, the smallest for the date in at least 39 years, as the most-severe drought since the 1930s spurred ranchers to cull animals, U.S. Department of Agriculture data show. Cargill Inc., the largest U.S. beef processor, will idle a Texas processing plant on dwindling supply of cattle in the region, John Keating, president of Cargill Beef, said in a statement on Jan. 17.

“U.S. beef production is expected to remain constrained by tight cattle inventories and the need for domestic herd rebuilding,” providing opportunities for Australian meat, Mathews said in a report dated Jan. 25.

U.S. beef output will total 11.273 million metric tons (24.9 billion pounds) this year, the lowest since 2004 and down 3.7 percent from a year earlier, the USDA estimates.

Cattle numbers in Australia may increase to 29.8 million head in the year ending June 30, according to Meat & Livestock Australia. Beef production will rise 2.1 percent to 2.19 million tons, lifting exports 2.2 percent to 1.4 million tons in 2013, according to the USDA.

Cattle for April delivery was little changed at $1.331 a pound on the Chicago Mercantile Exchange at 1:54 p.m. Singapore time.

To contact the reporter for this story: Phoebe Sedgman in Melbourne at psedgman2@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

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