Cattle saleyards, people

Three consecutive weeks of price advances on Aussie cattle markets causing the EYCI to bounce a total of 15% provide the impression that confidence is starting to build back up again. However, yardings are still incredibly low, but this week, signs of an increase in supply, coupled with further price increases could just be indicative that underlying demand is beginning to recover.

Last week’s east coast slaughter volumes took a 7% dip, down to 91,193 head, with volumes decreasing in all states, primarily driven by a 7% fall in QLD throughput, and a 11% plunge in VIC volumes. If we look at the seasonal slaughter chart (figure 1) a sharp drop at this time of year is fairly typical on average, although the decline seen in 2021 was significantly gentler.

EYCI eligible yardings lifted 19% from the week prior, to 7,221 head, with restocker volumes following suit with a 29% jump to 1,353 head, while feeder volumes climbed 10% to 2,784 head. All this is suggestive that weekly yardings volume have experienced a healthy lift from the historical lows seen last week. Couple this with the general increase in pricing despite the increase in supply, and we have an encouraging sign that buyer confidence, and demand for cattle may be in the early stages of improvement.

The Eastern states Young Cattle Indicator (EYCI) advanced 53¢(6%) on the prior week, climbing back up to 1,015¢/kg cwt- the level we were at back at the start of July, with a cumulative 128¢, or 15% increase clocked up since we hit the bottom of the price trough at the end of July. Roma steers traded at an average of 1,099¢/kg cwt, Dalby at 994¢/kg cwt, and Wagga at 1,097¢/kg.

In contrast, the Western Young Cattle Indicator (WYCI) went the other direction dropping 17¢(2%) over the week, to close at 853.97¢/kg cwt.

Most of the national indicators were lit up in green, with the weeks’ star performer being feeder steers, which jumped up 27¢(6%) to close at 493¢/kg lwt, while heavy steers got the wooden spoon for backtracking 21¢(5%) for the week, ending the week at 438ֶٕ¢/kg lwt.

The price for Australian export frozen cow mince (90CL) backtracked 13¢(2%) this week, but given that the price per pound in US dollars only slipped 1 cent, the majority of this fall can be blamed on the 3% jump in the AUD last week, all of which was reversed over this week, so the price should look more attractive next week once the deterioration in the exchange rate is accounted for. Steiner reports that US buyers are only interested in bargain hunting at the moment, as domestic supply is plentiful, and grilling demand is winding down. US cow cull volumes may remain elevated into the US autumn period, as drought has cut savagely into hay production and stocks. A feed shortage over winter may require US producers to continuing offloading cows and maintain higher slaughter levels.

The week ahead….

The rapid uplift in the price of key indictors such as the EYCI is very encouraging, but the fact remains that sufficient transaction volumes still just aren’t there to suggest that the apparent recovery in prices is particularly sustainable.

 Overall, many producers still seem to be holding back from supplying to the market, which is providing support. Ultimately, it’s time to do your sums on what the expected benefit from holding cattle longer to cash in on the weight gain will be and determine where your break-even point is in the event of a fall in the market, and think about how much risk you are comfortable with.

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Data sources: MLA, Steiner, Mecardo

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