MLA manager of market information Ben Thomas said Australia's severely depleted national cattle herd was the result of back-to-back years of record adult cattle turn-off in 2014 and 2015.
He said it was also exacerbated by recent widespread rainfall across some of Australia's largest cattle producing regions.
"Parts of western Queensland and NSW have experienced herd declines of up to 40 per cent in just three years. The national herd has dropped from a peak of 29.3 million head in 2012-13, to 26.2 million head this year," Thomas said.
"With Australian prices moving in a different direction to those globally, it becomes likely that once Australian production does eventually increase, prices will realign with global trends."
Thomas said eastern states adult cattle slaughter was destined to head from one unprecedented level to another in the space of just 18 months.
"During July 2015, the 52-week rolling average adult cattle slaughter peaked at an all-time high of 162,829 head," Thomas said.
"This coincided with near-record live cattle exports and the consequence is eastern states cattle slaughter will soon edge below 120,000 head for the first time since 2006.
"Expectations are for the rolling average slaughter to remain below 120,000 head for the majority of 2017 - an unprecedented low level for a longer duration than any other time in the past."
However, the abrupt slowdown in cattle slaughter is expected to result in more calves on the ground in 2017 and higher beef production in 2018.
"In the meantime though, there will be extremely tough competition for the limited numbers available," Thomas said.
Expectations are for the annual adult cattle slaughter to drop to 7.1 million head in 2016, down 21% year-on-year, before dropping a further 2% to 6.9 million head in 2017.
While Australian cattle prices remain at record highs, Thomas said the level at which the market eventually settles in the medium-term (2018-2020) will largely be dictated by the global trade environment, currency movements and the rate at which global demand increases.
"However, all things considered, it is unlikely that Australian cattle prices will return to pre-2013 levels, but rather establish a new level - somewhere in between existing long-term averages and the current record highs," Thomas said.
Beef exports this year are expected to reach 980,000 tonnes shipped weight (swt), down 24% year-on-year.
"Beef exports are declining and trade will continue to slow over the remainder of 2016, with even slower processing in the final quarter, combined with mounting competition leading to reduced exports," Thomas said.
