Hereford cattle in pen at yards

After spending all of 2019 trading at a discount of at least 100¢/kg to the 90CL price, the Eastern States Young Cattle Indicator (EYCI) has spent the majority of this year well above it. The 90CL - a benchmark price for frozen manufacturing beef into the US - has been losing ground this month, while the EYCI - Australia’s go to price point - has been on the rise. Price movements in the two have historically trended together, until last year when global beef demand pushed the 90CL sky high, and Australia’s ongoing drought kept domestic cattle prices in check. This year, widespread rainfall has brought about a complete reversal, and the EYCI currently sits 166¢/kg above the 90CL indicator.

Why the disparity? Let’s look at the EYCI first. Just a fortnight ago it reached another all-time record high of 794.25. This was 310¢/kg above the same time last year, or nearly 60% higher. Up until now this has still been driven predominantly by the change in seasonal fortunes creating strong restocker demand. Meat & Livestock Australia reports that throughout September, restockers operating on EYCI eligible cattle paid 94¢/kg more than processors, and 68¢/kg more than lotfeeders.

In comparison, the 90CL price indicator is 20 per cent lower year-on-year, and at 621.9¢/kg, has dropped nearly 5% in the past week alone (remembering that 90CL figures are one-week delayed). According to Steiner Consulting Group’s latest US update, this price decline is primarily supply driven, with 25% more imported beef landing in the US for the four weeks to October 10, than the previous year. Imports from New Zealand (up 164 per cent on the same period last year), Brazil and Argentina have all increased, and are seen as operating at a more affordable price point for importers, while of course supply from Australia remains tight and prices sky high.

The most recent example of the EYCI operating higher than the 90CL, as pointed out above, was in 2016-17, when cattle prices in Australia were last on a record run, and we all watched it break the previously elusive 700¢/kg barrier. In that case, the EYCI premium lasted for a majority of the 18 month period, and reached a maximum price divide of 180¢/kg. What turned it around last time? Seasonal conditions started to deteriorate, and the herd rebuild had reached a stage of more ample supply. This teamed with record high global demand reversed the premium until the 90CL was close to 470¢/kg above the EYCI. 

What does it mean?

If we use the ECYI-90CL spread to predict how long this record run of domestic cattle prices will last, there’s still plenty of positivity to come, especially if seasonal conditions remain favourable. However, last time around demand wasn’t under the cloud of looming global recession due to Covid-19, so regardless of domestic supply, export volumes could change the game.

Have any questions or comments?

We love to hear from you!

Key Points

  • EYCI is trading at 166¢/kg above the 90CL price, as restockers push domestic cattle prices higher and ample supply holds US import returns back.
  • The last time the EYCI was at a premium the domestic cattle price was also on a record run, in 2016-17, and the price differential peaked at 180¢/kg.
  • Within two years, this premium reversed to the 90CL trading at close to 470¢/kg above the EYCI in late 2019.

Click on graph to expand

Click on graph to expand

Data sources: MLA, Steiner consulting, Mecardo

Make decisions with confidence- ask about our board packs, bespoke forecasting and risk management services

Have any questions or comments?

We love to hear from you!
Cattle in feedlot
Cattle

Lotfeeders making hay

The cattle lotfeeding sector has been experiencing huge growth over the last few years. The September quarter saw growth in cattle on feed (COF) numbers

Read More »
Cattle

Attention turns to lighter cattle

Rainfall means opportunity and restockers with windscreen wipers on drove an increase in lightweight steer and heifer indicators nationally. The intent of processors as economic

Read More »

Want market insights delivered straight to your inbox?

Sign up to the mailing list to get regular updates to new analysis and market outlooks

Independent analysis and outlook for wool, livestock and grain markets delivered to you as it’s published

Commodity conversations podcast cover image, a illustration of a sheep standing on a cow's back with grain either side
Listen to the podcast

Join the Mecardo team for the Commodity Conversations podcast, where we provide short weekly market recaps and longer conversations with guests to discuss the drivers and trends in livestock, grain and fibre markets.

Photo of a farmer surrounded by Merino sheep in dusty yards
Research: Analysis of the Australian sheep flock

In this report for LiveCorp and MLA, we analysed the historical trends in the demographics of the Australian sheep flock, examining domestic factors that influence farm-level enterprise decision making. 

Image of harvested grain pouring into a chaser bin
SERVICES AND CAPABILITIES STATEMENT BROCHURE

We don’t just bring you the most up to date market insights. Find out more about Mecardo’s services including risk management advisory, modelling, benchmarking, research & consultancy.