A Wangaratta-based beef market analyst predicted a continuing drought would mean a record pay day for producers, with prices potentially hitting 750c/kg carcase weight.
Mr Quilty outlined his three-year forecast for cattle prices at the Reiland Angus seminar in Wagga on Tuesday, July 10.
“This time last year we were talking an Eastern Young Cattle Indicator price of 542c/kg and in 2016 we were at 650c/kg,’’ he said.
“Back then we were talking about a downturn in prices and today we are an EYCI of 516c/kg.
“This year we are 19 per cent down on the highs of 2016 when it got to the dizzy level of 720c/kg.’’
He said cattle producers would be forced to make hard decisions about what was on the other side when the drought broke.
Mr Quilty said the EYCI had a 92 per cent correlation to NSW feeder steer prices on a daily basis.
Last year, he forecasted the EYCI was expected to be at 600c/kg or 325c/kg liveweight by mid 2019.
“2018 is the challenging year – we are liquidating (the cow herd) at the rate of knots right now and depending on how hard we liquidate, will mean how quickly we rise,’’ he said.
“If the drought gets deeper, the rebound will be even harder and returns will be greater.
“We will exceed the prices of 2016 and in 2019-2021 we will see an EYCI of 750c/kg.’’
Mr Quilty compared two scenarios – where the drought finishes this year and where the drought finishes in mid to late 2019.
Under the first scenario, he forecast a fall in the cowherd of 1.27 million head followed by a rebound in prices in 2020.
Under the second scenario, the cow kill will reach 1.55 million in 2018, slow to 350,000 head in 2019, with the market rebounding to pass 2017 levels and falling away as the herd rebuilds.
He said the market would start to move upwards in spring because of buying ahead of the Chinese New Year in February.
Mr Quilty said a super demand cycle was being experienced where global and US meat prices moved in tandem, meat production volume increased, prices rise concurrently and US export volumes increase.
Driving the demand super cycle was 140 million people joining the global middle class each year, and by 2020 will become the majority of the global population for the first time.
Mr Quilty said Australia’s reliance on export markets meant any hiccups or disruptors would result in dramatic changes.
“Donald Trump is disrupting global trade – for us it has been beneficial in the short term but if we are not careful, it will be dramatic and in the negative,’’ Mr Quilty said.
“The Australian Productivity Commission has modelled the impact of a 15 per cent rise in tariffs across all countries would cause a global recession.’’