Cattle herd drover

Another week and almost another year - and yet another Eastern Young Cattle Indicator record. When we looked at the US-Australia cattle price equation in December 2020, there were “very little to no indications” that domestic cattle prices would come under downward pressure in the short term. And while we can probably chalk that one up as an accurate forecast - the only pressure on prices has been upwards in 2021 - it might also be considered a fairly significant understatement.

The EYCI hit a new high of 1167.25¢/kg this week, despite a rise in eligible young cattle supply, with demand driven by Queensland feeders and restockers. It closed out last week at 1147¢/kg, which was 45% higher year-on-year, having broken through its top price countless times this year. As a reminder of its meteoric rise, the corresponding week in 2019, the EYCI was 521.8¢/kg.  By this time in 2020, it had climbed to 791.8¢/kg. In 2021, the EYCI broke the 900¢/kg barrier by April, and at the end of July was above 1000¢/kg for the first time. In 2019, the EYCI averaged 487.13¢/kg for the calendar year. In 2020, it was 742.53¢/kg, and this year, with less than a week of trading left to account for, it’s averaging 960.74¢/kg. This puts the 2021 average at 23% above 2020, and 49% above 2019. In comparison, it has taken the Eastern States Prime Lamb indicator since 2013 to make the same percentage climb.

Historically, the US 90CL export price and EYCI have had corresponding trajectories, albeit with the 90CL at a premium. As you can see in Figure 3, in June last year, the EYCI overtook the 90CL and has been tracking well above ever since. This time last year, the EYCI was 172¢/kg above the 90CL, having set a record premium of 180¢/kg in November 2020. In the same week in 2019, the EYCI was 428¢/kg below the 90CL, with the 90CL having hit its own Australian dollar record in November of that year, at more than 970¢/kg. Currently, the EYCI is nearly 210¢/kg higher than the 90CL, after reaching a record 257.90¢/kg premium in October. While this still demonstrates a significant differential between Australia’s domestic returns and global beef prices, we can see that for a majority of this year the 90CL has been generally following the EYCI on its upwards trend, with the 90CL 40% above year ago levels (compared to EYCI’s 45%).

Total cattle slaughter in Australia for 2021 is 21% below 2020 level and the female slaughter rate fell below 45% in the September quarter – the first time it had done so since the December quarter of 2017. In turn, total beef exports for the year are tracking about 15% lower year-on-year, but demand has finished the year strong, as demonstrated by higher month-on-month exports, the rising 90CL price and finished cattle prices ramping up in the last quarter of the year, with both medium and heavy national steer indicators also hitting new highs since the start of October.

What does it mean?

With seasonal conditions remaining favourable to livestock producers so far this summer, especially in the east, and finished cattle having been on the rise – both the national medium steer price and the national cow price reached record liveweight returns of 924¢/kg and 704¢/kg respectively in the first week of September. Restocker and feeder confidence seems as strong as ever, especially out of Queensland after recent rainfall. Which means we can once again say that there’s little to no indication of downwards pressure on cattle prices in the short term. As with all export driven markets, the global market will have a significant role to play in the new year, but with that to looking up, producers should continue to fare well as we turn into 2022.

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Key Points

  • The EYCI breaks record yet again, reaching 1167.25¢/kg this week, and averaging 960¢/kg for the year.
  • US 90CL price indicator closes in on 900¢/kg, trending upwards with the EYCI for the second half of 2021.
  • Total slaughter to be more than 20% lower for the year, as finished cattle prices also finish 2021 on a high.

Click on figure to expand

Click on figure to expand

Click on figure to expand

Data sources:  MLA, Mecardo

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