The Eastern Young Cattle Indicator (EYCI) crumbled again under the onslaught of another huge week of strong supply, backtracking 31¢(5%) across the week, finishing up at 616¢/kg cwt.
Last week’s strong supply situation could have been dismissed as just a temporary surge related to a backup of cattle due to the public holiday heavy April period. However, this week displayed a sustained level of marketing interest across most of the country, except for Victoria, where numbers halved. Overall, though, total east coast yardings only slipped 7% compared to last week. 54,404 head is lower than last week, but we can’t ignore that this figure is a whopping 30% above 2022 levels at the same time last year, and 7% above the 5-year average.
Like last week, it must be highlighted that the 5-year average historical pattern indicates that elevated yardings typically will persist for a few weeks till early June. Eyeballing the yardings chart for the last couple of weeks indicates that given how yardings have been tracking recently, mirroring the 5-year movements, there is a good chance we will encounter a strong supply for a while yet.
As we expected last week, the newly released slaughter statistics showed a solid uptick, but unlike how yardings (supply) have been evolving, we aren’t seeing outperformance compared to the five-year average. This isn’t a great omen for the continued strength of demand, especially given that finished cattle prices took a hefty hit this week. The suspicion is that processor buyers may have loaded up last week, and just didn’t need as great a volume this week.
As the supply and price situation has improved for processors, we will likely need to wait until overseas export consumers react to the more attractive prices for Aussie beef. Chats I’ve had with lamb export industry insiders recently have indicated that high prices for Aussie meat products have made them a harder sell lately, because of subdued economic conditions and confidence in many major destinations. This is a common problem with beef, plus a rising Aussie dollar has not helped. Given prices have dropped this week, and processor capacity appears to be good recently, it’s reasonable we may see some more buying activity coming through in the coming week as the market adjusts and rebalances.
The national indicators displayed a bloodbath of red ink, with cow prices winning the wooden spoon by a mile, as prices tanked 58¢ (20%) down to 224¢/kg lwt. Heavy steers followed the negative trend, collapsing 29¢ (9%) to settle at 300¢/kg lwt.
The buoyancy seen in the US imported 90CL frozen cow price has now turned around, with prices now taking a sinking trend, submerging by -19¢ (-2%) over the week, to close at 837¢/kg cwt. The fall came from both a 4¢ (1%) drop in the native US price back to 253.5¢/lb and the appreciation of the Aussie dollar last week. Steiner’s latest report for MLA continues to highlight that prices for major US fast food inputs such as chicken and pork are showing weakness and that inventory levels are historically high. Higher revenue numbers being reported by many US fast food chains are more a reflection of inflation and price hikes, hiding an underlying trend of lower unit sales, and hence demand for 90CL.
The week ahead….
The worrying trend of sustained strong supply seems to have set in, but the price falls in the market may have enabled processors and producers alike to adjust their view and reassess their appetite for cattle considering the better value on offer.
There may be some room for a minor upward correction in prices, particularly for cows and heavy cattle next week given the steep falls sustained this week. However, the prevailing sentiment is that it’s unlikely to last if supply pressure is maintained for the next few weeks.