Pent up demand prevails

The Eastern Young Cattle Indicator (EYCI) inched up 4¢ (<1%) to close at 689¢/kg cwt despite a huge tidal wave of additional supply inundating saleyards this week.   Eligible yardings exploded by 141% week on week, with close to 16K cattle yarded, which is the highest weekly total seen since mid-February.

Roma steers traded at 732¢/kg cwt, with the big yarding at Roma attracting additional buyers. Restockers were bidding enthusiastically at Dalby, where steers traded at 738¢/kg, and processor competition was fierce in Wagga as steers finished at 774¢/kg.  

Opportunity to sell stock in the full week sandwiched between the Easter and Anzac Day disrupted weeks had yardings jump 140% week on week, with the massive influx consistent across the states.  Most of the activity was happening in the young cattle specification, as heavy steer and cow numbers only pushed up 60% and 100% in comparison. Argus reported that lot feeders are actively buying at the saleyards, and heavy feeder steers have become harder to source, with some feeders raising grid prices to attract volumes.

There was no slaughter data released for last week but given that the back end of the Easter holidays cut away a day, slaughter volumes would likely have tracked around the 80-90K head mark. The brief return to an uninterrupted week this week would have seen volumes lift substantially, but we generally don’t see a full recovery to more typical levels kick in till May.

Buyers were clearly in strong attendance as the board has been lit up all in green for the first time in a while, and prices defied the downward pressure usually exerted by high supply. Heavy steer prices took the ribbon for the best performance, with prices rocketing up 23¢ (7%) to close at 345¢/kg cwt. Restocker steer prices also kicked up 15¢ (4%) to 402¢/kg.

The US imported 90CL frozen cow price clocked in another positive session, recording an 8¢ (1%) lift to close last week at 858¢/kg swt. Both key variables were working in the price’s favour, with the Aussie dollar weakening slightly against the greenback, coupled with the native price in US dollars inching up 1.5¢/lb to 260.5¢/lb, pushing the price higher in AUD terms. US cattle prices have leaped up around 10% over the past few weeks. The buoyant market has led to US producers reducing commitments to supply into forward periods by up to 35% compared to a year ago, pushing processor demand into the immediate delivery spot market to make up volumes.

For US processors, Memorial Day federal holiday weekend, which is at the end of May, is fast approaching and it’s the biggest beef consumption weekend on the US holiday calendar. Public holidays in the US historically cause slaughter volumes to plummet. Steiner describes US buyers as being in a panicked scramble at present as they try to accumulate sufficient reserve volumes to cushion the expected dip in supply.

While the US cattle market looks rosy on the surface, there are dark clouds on the horizon, especially for lean grinding beef demand. Despite the US beef market rallying in general, imported beef trade volumes have been light in comparison, and the 90CL market has not been lifting at the same pace as other cuts. The official May 11 end of the US COVID public health emergency will raise expenses substantially for many Americans. Free health care benefits will be cut off, with millions impacted by a number of different social support schemes ending or changing. Steiner reports that the mood in the beef trade is that demand is slack, and this is supported by the value of US food service sales being down 2.2% in February, and flat in March. Given that US fast food prices have jumped in 2023, and spending power is set to take a hit, especially given the elevated interest rate environment, grabbing a burger may prove to be a lot less affordable for Americans going forward, cutting into lean beef demand.