Angus Cattle

While much of NSW and Southern Queensland has received above-average rainfall in April, some key cattle areas in Western Victoria, South Australia and WA have missed out. The market is treading water, and there might be a trading opportunity on the cards.

A look at the Eastern Young Cattle Indicator (EYCI) and the National Feeder Steer (Figure 1) shows us the two prices have been in lockstep this year.  The saleyards feeder indicator will usually be a little behind the direct-to-feedlot price, but it gives a good indication.

Hindsight must be used with caution, but we can see that the very weak prices of spring 2023 saw the market somewhat oversold.  The bounce has been strong, but we are still way off the highs of 2021-2022.

The young cattle market has steadied in the autumn, and this can partially be attributed to dry parts in the south of the country.  Cattle are certainly flowing into NSW, but after the volatility and seasonal variation of last year, there is plenty of caution from buyers.

From looking at beef export values we know that there is significant room for cattle prices to move higher.  On the downside, the growth in the herd and recent experience tell us that there is room for some downside too.

Traditionally cattle prices rally in winter and into spring, and if you subscribe to the theory that it has to rain in the south at some stage, then this rally is something we could expect this year.  Depending on how the spring pans out, prices could remain stronger through the end of the year.

Figure 2 shows how a trade might play out for cattle bought now.  The basic margins (before any costs are taken into account) look relatively profitable.  The strong price scenario, which is entirely possible, shows an almost doubling of cattle value when weight gains and price improvements are taken into account.

The downside makes the trade look tight, but this is likely helping keep a lid on the price of store stock at the moment.

Note that this trade calculation does not allow for any feed costs; these will vary between enterprises and should be calculated on a case-by-case basis when considering any trade.

What does it mean?

While not at the extreme lows of spring 2023, young cattle are still relatively cheap. With significant upside potential if supply tightens, and reasonable margins in a steady market, buying cattle now looks like a good prospect.

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Key Points

  • While cattle prices have come off lows, they have been steady for some time.
  • Prices historically rise in the winter, and fundamentals are strong.
  • Buying young cattle to sell in spring looks like a good trade.

Click on figure to expand

Click on figure to expand

Data sources: MLA, Mecardo

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