The Eastern Young Cattle Indicator (EYCI) has had a rather unexpected rally this week, quickly heading towards the magic 1000ȼ mark. It might not get there this week, but it’s worth trying to work out what’s behind this latest rally.
At the close of sales on Wednesday the EYCI was sitting at the lofty record high of 988.11ȼ/kg cwt. A quick look at the contributing saleyards shows Roma was the largest, making up nearly 35% of the indicator at just over 1000ȼ. Singleton, in northern NSW was the most expensive, at 1088ȼ, but that was on just 343 head.
It is northern yards driving the market, and a look at rainfall over the past fortnight gives us a little insight as to why restockers have gone hard at Roma and other markets. July isn’t usually a big rainfall month in Queensland, but the last two weeks has seen more than the July average fall across some areas. The supercharged herd rebuild has received a boost.
Rainfall and grass supply is obviously a major driver of young cattle prices. Export beef demand is also a driver, but it has to be sifted down through processors and lotfeeders before it impacts young cattle. Regardless, we can see the 90CL Frozen Cow Beef Export price has rallied strongly since March (figure 1). We thought the 90CL was catching up to the EYCI, but the 90CL might be pushing the EYCI higher.
Figure 2 shows the EYCI premium or discount to the 90CL. Surprisingly, even at Wednesday’s record high, the EYCI premium hasn’t quite reached the 36% seen back in January. The EYCI premium on Wednesday was ‘just’ 26%. If we put a 36% premium on the current 90CL price of 785ȼ, it gives an EYCI of 1065ȼ.
If we convert the EYCI to liveweight terms it comes in at 533ȼ/kg lwt. Those who follow store cattle markets will say this is still relatively cheap. There have been many cattle making well over 600ȼ at store sales and on online platforms. The EYCI probably won’t get to 600ȼ lwt, but it might have some further rises yet.
What does it mean?
It’s not unusual to see the EYCI rally at this time of year. In fact, the traditional peak used to be in late September, and while we are only early in the season, talk of another La Niña might see buyers waiting until October for better supply.
As outlined there could be further upside for the EYCI, with 1000ȼ within reach and many yards already there, the next month will be interesting.
Key Points
- The EYCI has hit another record, heading towards 1000ȼ.
- Rain in South East Queensland has given the herd rebuild an extra boost.
- There might be room for the EYCI to rally a bit further yet, if supply remains tight.
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Data sources: MLA, Steiner, Mecardo
