1) The document summarizes projections for the Australian cattle market in 2016, noting that cattle supplies will bottom out in 2017 and production will recover more quickly than in past droughts. Exports will continue to stretch domestic product availability. 2) Cattle prices are expected to remain firm in 2016 as tight cattle turnoff shrinks the discount to US prices. Store cattle are predicted to outperform finished lines. 3) While trends are clear, the speed of changes in production and their market impacts remain uncertain, such as how high prices may rise and how quickly herd rebuilding can occur.

1. What to look out for in 2016 for cattle markets?
1 February 2016
Presented by:
Ben Thomas, MLA & Robert Herrmann, Mecardo
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2. Some housekeeping
» 15 minutes Q&A at the end
» Use Chat Box (bottom left, near cog) to
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» For any technical issues:
– Dial to speak to Redback Conferencing
• *0
• 02 8014 5150

3. Before we start
» Presentation is content rich – Charts and Figures.
» Charts will be used to show trends and tell a story – don’t get
too caught up on the details.
» Outlook remains bullish for cattle markets, albeit not as
strong as in 2015.
» Focus on the US cattle cycle and its impact upon local prices
» Shrinking local discount to US prices due to tightening cattle
turnoff
» Herd rebuild phase to support store cattle prices to see them
outperform finished lines
» Relevant information for strategic long-term decision making.

4. 2016 Beef projections
Ben Thomas – Manager, Market Information

5. We know the trend, but…
How low will beef supplies go?
When exactly will that be?
How high will cattle prices go? Or have we already hit the
peak?
What markets will be least / most affected?

6. Slaughter declined in 2015 – even with dry
0
20
40
60
80
100
120
140
160
180
200
‘000head
weekly slaughter 10 week rolling average

7. Adult slaughter down 16% in 2016
4
5
6
7
8
9
10
11
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015f
2017f
2019f
Millionhead
7.6 million head

8. Jakarta wet market prices keep increasing
0
20
40
60
80
100
120
140 2007
2008
2009
2010
2011
2012
2013
2014
2015
‘000IDR/kg
Knuckle Blade Trimmings

9. Live cattle exports down 17% in 2016
0
0.2
0.4
0.6
0.8
1
1.2
1.4
Millionhead
1 million
head

10. Herd dropping to 26 million head in 2016
15
17
19
21
23
25
27
29
31
33
35
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016f
2018f
2020f
Millionhead
Low natural increase will
mean herd of 25.7
million head in 2017 –
same as 1994

11. Cattle on feed trending towards 900k head
500
600
700
800
900
1,000
1,100
-2
-1.5
-1
-0.5
0
0.5
1
1.5
2
2.5
3
Feb-04
Oct-04
Jun-05
Feb-06
Oct-06
Jun-07
Feb-08
Oct-08
Jun-09
Feb-10
Oct-10
Jun-11
Feb-12
Oct-12
Jun-13
Feb-14
Oct-14
Jun-15
Feb-16
Oct-16
‘000head
Cattle on feed (RHS) 6-month rolling average margin index (LHS)

12. A$ forecast to stay below 70US¢
Dec-15 Mar-16 Jun-16 Sep-16 Dec-16
Westpac 0.68 0.66 0.66 0.67 0.69
NAB 0.7 0.68 0.69 0.7 0.7
CBA 0.66 0.65 0.67 0.69 0.7
Average 0.68 0.66 0.67 0.69 0.70

13. Beef and veal exports down 18% in 2016
400
500
600
700
800
900
1000
1100
1200
1300
1400
‘000tonnesswt

14. Per capita consumption continue declining
$0.00
$5.00
$10.00
$15.00
$20.00
$25.00
20
25
30
35
40
45
Kg/person
Conumption (LHS) retail beef (real) retail chicken (real)

15. Conclusions
• Australian cattle supplies will bottom out in 2017
• Production will recover quicker than in previous drought recoveries
• Exports continue to stretch product on the domestic market
• Prolonged period of lower year-on-year quarterly production
While the likely trends are clear, the speed of change and market
impacts are less so
• How high are cattle prices going?
• How quickly can the herd and production be turned around?
• Which markets are likely to react more to the lower product availability and higher
prices?

16. About MLA
Meat and Livestock Australia Ltd (MLA) strives to be the
recognised leader in research, development and
marketing.
MLA delivers value to levy payers by investing in
initiatives that contribute to:
• Producer profitability
• Sustainability
• Global competitiveness
MLA is a producer owned, not-for-profit organisation
and not an industry representative body.

17. Thank you
Ben Thomas
bthomas@mla.com.au
ph: 0400 300 612

18. Disclaimer
To the best of MLA’s knowledge the information contained in the publication
accurately depicts existing and likely future market demand. However, forecasts and
projections are imprecise and subject to a high degree of uncertainty.
MLA makes no representations and to the extent permitted by law excludes all
warranties in relation to the information contained in this publication. MLA is not liable
to you or to any third party for any losses, costs or expenses, including any direct,
indirect, incidental, consequential, special or exemplary damages or lost profit,
resulting from any use or misuse of the information contained in this publication.

19. US Cattle Cycle and US Cattle Prices
» Cattle supply
and prices are
cyclical
» 8 major cycles
over the last
100 years
» Expansion
phase 3-8 years
» Liquidation
phase 2-5 years

20. US Cattle cycle influence on Australian prices
» Similar cycles in
Australia but
impact on price
is subdued
» Australian
market is
“export-centric”
» Domestic cattle
prices should
follow US cattle
and beef
markets

21. Australian cattle cycle and US influence
» Strong price
correlation
between US and
Australia
» During 2013-14
domestic market
deviated
» 2016 season
signals a return
to “normal”

22. Spread discounts to shrink

23. Heavy steer and EYCI price forecast

24. EYCI price forecast – supporting evidence

25. Take home messages
» MLA and USDA projections are the backbone for our
price outlook
» Cattle markets present distinct long-term structural
supply cycles, which in turn, determine price cycles.
» Tightening cattle turnoff in 2016 will continue to see
discounts to US prices shrinking to underpin firm
domestic cattle prices.
» The EYCI, and store cattle in general, will outperform
finished lines in 2016.
» Cattle producers should enjoy favourable margins,
particularly breeding operators.

26. More information
» Matt Dalgleish – Market Analyst
– matt@agconcepts.com.au
» More info – Andrew Whitelaw:
– andrew@mecardo.com.au, 0457 054 169
» Non-Mecardo subscribers will receive one
month of Mecardo Premium for free