The live cattle trade out of northern Australia has witnessed its biggest price crash since 2011, with key markets such as Indonesia and Vietnam struggling with the COVID-19 pandemic.
The Indonesian feeder steer price out of Darwin, is sitting at around $2.60 a kilogram, which is well down on the record $4 a kilo that was paid just last month.
It means a 350-kilogram steer which last month was worth up to $1,400, is now valued at just over $900.
So, what has gone wrong?
Multiple factors causing price slump
Australia’s biggest customer for live cattle is Indonesia and right now it is facing a number of serious challenges.
Indonesian President Joko Widodo declared COVID-19 a natural disaster last week, with the virus now detected in all 34 provinces and the death toll steadily rising.
The Indonesian Rupiah has also crashed to its lowest level in over 20 years, which has severely reduced the buying power of Indonesian cattle importers.
Tony Gooden from exporting company Frontier International, said the COVID-19 pandemic had created major challenges for the supply chain.
“In recent weeks both the Indonesian and Vietnamese governments have put in lockdown policies, which has interrupted normal day-to-day business,” he said.
“Both in Indonesia and Vietnam, some abattoirs have physically stopped operating because they are concerned about people interaction and the spread of COVID-19, and because demand for their product has reduced rapidly.
Mr Gooden said with Ramadan starting later this week, Indonesian feedlots were at near capacity and would normally enjoy “exponential” growth in sales around the religious month of fasting.
He said depending on the region, there were feedlots now reporting a 40 to 60 per cent drop in sales.
“There’s a lot of cattle [in Indonesia] that were more expensive when bought a few months back, they’ve now been on feed and they’re holding these cattle a lot longer, I’ve heard some have been in feedlots for up to 200 days [instead of the usual 70 to 100 days], which costs a lot of money.
“They’re just concerned that if the sales don’t come to fruition [during the Ramadan period], they’re going to be left with a big lag-over of cattle.”
What will the price do next?
An exporter who locked in cattle for $2.60/kg last week, caught a lot of people in the northern cattle industry by surprise.
One NT cattle producer who was offered that price, but turned it down, told ABC Rural they were now worried “it was the wrong move”.
“But it was just too big a slip [in price],” they said.
“And our cattle are suited to other markets, not just Indonesia.”
Mr Gooden said the live export price to Vietnam had now dropped as well, with heavy steers falling from about $3.40/kg a few weeks ago to about $2.80/kg to $2.90/kg.
He said the market right now “was very unpredictable”, which was making it hard to guess what the price might do in the coming months.
“It really depends on how this COVID-19 situation plays out in Indonesia and the Ramadan sales,” he said.
“I think there’s a good basic demand for protein and I don’t think the market will change a lot in the short to medium term.
“If the seasonal cycle runs its normal course then later in the year the prices should increase, purely because the national herd in Australia is reduced.