Is rosy US 90CL outlook grinding to a halt?

beef patties _ image

Both cattle supply and pricing softened across the country, with the EYCI hitting a new record low during the week. With ANZAC day this week causing some saleyards not to operate, and processors to skip a day; the minds of many turned away from the markets to honour our fallen veterans.

The Eastern Young Cattle Indicator (EYCI) suffered an 18¢ (3%) fall this week, closing at 671¢/kg cwt. However, on Wednesday, the price broke into a new record low territory not seen since February 2020, at 664¢/kg cwt. The falling price can be put down to a lack of support on the demand side, as eligible yardings of young cattle were down 45% from the week prior, crashing to 8,747 head. This ranks among the smallest weekly offerings, seen in the last year or so, which would have helped hold prices from falling further. Steers traded in Dalby, Dubbo, and Wagga at 701¢/kg cwt, 710¢/kg cwt, and 758¢/kg cwt.

Both Argus Northern QLD weekly commentary and Wagga saleyards reports indicated that feedlot buyer interest in the saleyards is currently solid, particularly for heavier specifications, suggesting that supply through alternate direct private channels may also be down in the background.

The latest release of slaughter data brought with it no real surprises, with last week’s holiday-free status enabling a clear run of production all week, pushing slaughter up 29% to 112,138 head, which is a smidgen over the 5-year rolling seasonal average for this time of year. Slaughter history suggests that there is good potential to see a further ramp-up in abattoir demand throughout May, which we can expect will help underpin pricing for well-finished cattle over the next month.

Last week’s run of positive price movements on the national indicators was mostly fully reversed, with the board flashing consistently red this week. The wooden spoon went to heavy steers, which fell 13(4%), closing at 332¢/kg lwt. Despite the headline doom and gloom of lower prices this week however, it must be pointed out that over the last month, the indicator prices are ahead from where they started a month ago, with heavy steer values in particular up 5%, which is consistent with anecdotal market reports that supply of preferred quality finished animals is tight in some locations.

US imported 90CL frozen cow price backtracked slightly for the first time in a while, with the price in AUD terms dropping 3¢ (<1%) to close the week at 855¢/kg swt. The cause was all down to a slight appreciation in the AUD against the greenback, while the 90CL price remained static at 260.5 US¢/lb.

US domestic 90CL prices have effectively stalled despite the tight supply environment brought about by lower slaughter and falling average weight per head, indicating that overall demand for grinding beef is suffering.  Recent retail price rises in the fast-food sector are seen as the source of woe. Supporting the contention that US food service demand is falling is the fact that the wholesale prices of competing alternative proteins such as chicken breast and pork are dropping.  Pork prices operating at the cheapest levels seen in years. 

On the retail side, US supermarket scan data from Circana analysed by 210 Analytics is also suggesting a recessionary pattern playing out in the US, with sales, volumes, and retail prices of beef, pork, and lamb all falling in Q1 2023. A bright spot in the US retail market is that lower shelf prices for the ground beef subcategory have reportedly been driving stronger consumer demand. This will in turn have the impact of supporting US domestic prices, and, in turn, prices for imported Australian products.

The week ahead….

With the flurry of holiday disruption that defines most of April now over, we can expect a ramp-up in activity by both buyers, and sellers as processors return to a more normal schedule, and saleyards go back to operating consistently.  

With the shadow of potential El Nino risks this year weighing on the outlook for pastoral conditions though, any price rises are more likely to be processor demand-driven, so all eyes will be firmly trained on how global beef prices evolve.

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Data sources: MLA, Mecardo, Steiner, Argus, Circana

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