The projections, released this week, found the cattle herd was up 3 per cent year-on-year to 26.9 million head.

But the change isn’t likely to kick in until the second half of 2017, with tight supplies, strong restocker demand and the subsequent likelihood of a strong young cattle market.

MLA Market Information manager Ben Thomas said the cattle market would start to feel the impacts of the increase as the year progresses.

“Once beef production slowly starts increasing again, there will be some downward pressure on prices in the Australian cattle market,” Thomas said.

A further 3% decline in Australian cattle slaughter in 2017, to 7.1 million head, is also expected.

“While this is a significant fall, it’s not nearly to the same extent as what occurred over the past 12 months when there was an extremely rare 19% drop,” Thomas said.

“The primary reason for the lower slaughter is the expectation that many producers will be retaining as many cattle as possible to replenish depleted herds; even though the herd is larger than last year, it is still historically low.”

Despite forecasts for slightly heavier cattle, Thomas said Australian beef production was also forecast to fall, down 3% to 2.1 million tonnes carcase weight (cwt).

“Again, it’s the first half of the year that is likely to see supplies at their tightest, and production will probably start slowly rebuilding from there.”

Producers in southern Australia are expected to rebuild their herds at a faster rate than their northern counterparts.

“Assuming average rainfall, the southern Australia herd could return to pre-drought levels by 2018,” Thomas said.

“In contrast, the northern Australia herd is not only in a greater deficit, but the otherwise anticipated above-average branding rates in early 2017 will have been inhibited in some regions by the extremely hot conditions during November and December. 

“Rebuilding in some regions could be delayed and it seems unlikely that the full Queensland herd will recover to pre-drought levels until 2021.”

Thomas said the number of cattle on feed is forecast to remain constrained by the still very high feeder cattle prices.

“While entry cattle prices remain dear, solace comes from cheaper Australian feed grain prices and, under this scenario, forecasts are for cattle to stay on feed for 10% to 30% longer than what otherwise would have been the case,” Mr Thomas said.

“The overall outcome is the expectation for numbers on feed to range from 700,000 to 750,000 head per quarter, and turn off of just over 2.5 million head, which is 35% of total adult slaughter.”

Australian beef and veal exports are likely to correlate with the lower beef production and are estimated to ease a further 5% this year to 970,000 tonnes shipped weight (swt), meaning 69% of Australian production will be destined for international markets.

“For 2017, live exports are forecast to be 800,000 head, down a further 24% on top of the 21% decline that occurred last year,” Thomas said.