It seems that we are heading into a second consecutive year of weaner sales lacking support from northern buyers. The extreme dry has cattle in the north cheaper than those in the south, so don’t expect too many coming down looking for cattle.
In pre-Christmas store sales and in limited AuctionsPlus sales, southern weaner steers have been making in the 290-320¢ range for cattle under 350kgs lwt. There is likely to be little change over the next three weeks, with rain being the factor which could see significant upside.
The season has been kind in Southern Victoria and South East South Australia this year, but there are a lot of cattle which are going to have to find a home in January. Generally, lotfeeders will offer support on the heavier cattle but finding demand for the lighter end will be interesting.
Regular readers will know we have a couple of main measures of value of any particular category of livestock. How does it compare to the market in general? And will buyers be able to make money out of them?
Figure 1 shows historical Victorian weaner steer prices for 280-300kg steers, the Eastern Young Cattle Indicator (EYCI) in January and the difference, or spread, between the two. For 2020 we have used December EYCI and weaner values.
At 310¢/kg lwt, weaners will again be at the lower end of the last five years, but at a solid premium to the EYCI of 16%. Weaners have only been priced better in two years on the relative scale, so on this measure they are good selling.
Figure 2 gives an idea of why weaner prices are holding well. Gross margins on buying weaners and growing out to feeders or heavy steers remain very good for those who have cheap feed, ie grass, in front of them. Even at the lower end of the expected price scale, reasonable profits should be made.
What does it mean?
With little risk of making a loss on weaner cattle, prices should find support in January. The question is whether there are enough buyers of lighter cattle; prices could drift lower if major buyers get their fill.
Rain would obviously help boost prices, but it would take some serious falls over the break to see significant upside in weaner prices.
- The Victorian weaner sales are heading into a second consecutive year of little northern support.
- If current values hold, prices are still good for sellers and offer opportunities for buyers.
- It would take very good falls of rain to see significant upside in weaner values in January.
Click on graph to expand
Click on graph to expand
Data sources: MLA, Mecardo