EYCI rebounds, but heavy steers stumble

After a slight stutter last week, the Eastern Young Cattle Indicator (EYCI) has begun to recover - not quite back to breaking records again but moving in the direction sellers want, upwards and onwards. The national indicators, however, mostly lost ground. In the US, 90CL prices have sagged slightly in line with typical seasonal factors, but the outlook is still strong, with the imported beef market looking to remain tight into the medium term.

Yardings lifted 5% on the week prior, where all states saw a lift to some degree.  Yardings are currently tracking at around 16% softer than the five-year average for this time of the year. A total of 41,132 head were yarded on the east coast for the week ending 30th of July, 2021.

East coast slaughter backtracked last week, with the 2% slip resulting in the majority of the week priors gains being wiped out. Slaughter remains 30% down on the five-year average level for this time of year, reflecting the current restocker fuelled constrained supply situation. 95,640 head of cattle were slaughtered for in the week ending 30th July 2021, which was down 2,328  head on the week prior.

The EYCI recovered from its minor stumble last week, advancing another 12¢, to 997¢/kg cwt, though slightly down from its weekly high of 999¢/kg on Wednesday. Roma Store and Wagga average prices both bounced back over the 1,000¢/kg mark again, to 1,005¢/kg and 1035¢/kg.

To indicate the tightness in young cattle markets presently, average weekly volumes of EYCI eligible cattle are tracking at around 14% below the five-year average for this time of the year, though supply is tracking slightly better than the same time last year (figure 1).

In contrast to the improvement in the EYCI, the National indicators were all in the red, with medium and heavy steers posting heavy falls over the week, while medium cows were the solitary winner of the bunch. We have recently seen heavy steer prices fall heavily against the EYCI before though, then rebound rapidly, so another dip being recorded next week will be necessary before it becomes concerning.

Medium and heavy steers both fell 19¢(4%) to respectively backtrack down to 427¢/kg lwt and  407¢/kg lwt. Restocker and feeder steers also fared poorly, losing 8¢(1%) and 7¢(1%), to close at 587¢/kg lwt and 488¢/kg lwt. Processor and vealer steers slipped marginally, by 1¢(<1%) and 3¢(<1%) to 514¢/kg lwt and 563¢/kg lwt.

Medium cows bucked the trend, advancing 10¢(3%) to 320¢/kg lwt, which is an all-time record price. However, new records for cow prices have been constantly set over the last couple of weeks.

The Aussie dollar appreciated another 0.7% for the week, lifting to 0.740US. Despite our lockdown woes at the moment, the RBA is upbeat about the prospects of the Australian economy, holding the view that the strong trajectory we have been travelling on will continue, a sharp post lockdown rebound is likely, and has lifted its 2022 GDP forecasts to 4% growth.

US 90CL frozen cow prices slipped 3¢(<1%) to 792¢/kg swt, with the fall caused by both the appreciating value of the AUD, and a downtick in the underlying price in US dollar terms of 2US¢/kg to 583¢/kg. Steiner reports that the softer prices are not unusual for this typically quiet time of year, as manufacturers take downtime for maintenance, resulting in relaxed demand for imported beef. This weakness was compounded by elevated prices for fat trim, causing buyers to retreat on the expectations that prices fall back in the coming months.

However, on the more positive side for the medium-term outlook, the imported US beef market remains tight, with the falls in volumes of AUS and NZ beef imports not being fully backfilled by other sources, such as South America.

The week ahead….

After several weeks of significant rain in the south, the forecast is looking drier for the week ahead. The question is, will this change soften restocker enthusiasm? Some respite from the rain and cold will give many waterlogged southern pastures a chance to drain, and put in some growth, and the price recovery seen over the past week can only be positive for sentiment. Overall, with little change to the view of a good season coming up, sustained support in the market can be expected in the week ahead, unless heavy steers track significantly lower again, which could be a cause for concern.

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Data sources: MLA, Mecardo, BOM

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