Market Morsel: A mid winter chill for processors
After successive months of clawing back the losses, beef processors got stung in July with higher input cattle costs outweighing gains recorded in beef export market prices and the benefit of higher co-product prices. July saw 6%-7% increases to cattle prices at the sale yard, which is a bonus to producers, but reflects in higher costs to processors.
Sometimes the higher domestic cost can be offset by gains in export prices and/or the increased value of beef product and offal sold offshore. Unfortunately, this wasn’t the case for Australia’s beef processors during mid-winter with export price increases averaging only 1%-2% gains on the month and average co-product values lifting by 2%.
The net result was a drop in the monthly beef processor margin, according to the EP3 model, with the July 2021 average loss per head of cattle processed coming in at $305, widening by 28% from the $239 loss per head recorded in June*. This brings the annual average processor margin to a loss of $297 for the 2021 season.