The last time we looked at cattle trading opportunities was back in May. Little has changed in terms of wider cattle values, but weaner cattle have seen demand spike in recent times. Hence we revisit our trading budget.
The Eastern Young Cattle Indicator (EYCI) and the National Feeder Steer (Figure 1) remain
closely aligned, and both have rallied in recent times. The closing value of the EYCI last week was 669¢/kg cwt, the highest level since April 2023, just surpassing the February
high.
The saleyards feeder indicator will usually be a little behind the direct-to-feedlot
price, but it gives a good indication of price direction. The National Feeder
Steer Indicator sat at 367¢/kg lwt, a slight premium to the EYCI. Again, Feeders are priced at their highest levels in 16 months and have rallied over 10% since the start of July.
Cattle markets have been on the rise in general since the turn of the financial year,
and this is not unusual for this time of year. Cow sales slow in the winter, and grassfed cattle are harder to finish, both of which are reflected in stronger slaughter cattle prices. When slaughter cattle prices rise, this flows through to feeder and store cattle markets.
Meat and Livestock Australia’s (MLA) online cattle indicator data pegged Weaner Steers
at 390¢/kg lwt last week, so we can use that in a trading budget.
The last time we looked at trading, we had weaners at 350¢ and pegged feeders at 275¢
worst case, 375 average and 450¢ best case. Given movements in the market, it’s safe to lift the worst case to 300¢, the average can stay at just below current levels of 350¢, and there is still
scope for 425¢/kg lwt if the season is favourable.
Figure 2 shows how a trade might play out for cattle bought now. The basic margins (before any costs are taken into account) look relatively profitable. The strong price scenario, which is
entirely possible, shows a 63% increase in cattle value when weight gains and
price improvements are taken into account.
The downside makes the trade look tight and would result in a loss if supplementary
feeding was required. Note that this budget does not allow for any feed costs;
these will vary between enterprises and should be calculated on a case-by-case
basis when considering any trade.
What does it mean?
The recent rally in young cattle values has taken some of the shine off cattle trading. There is little doubt that traders have been running similar numbers, and see the risk of buying young cattle as one worth taking. This is especially the case given the positive outlook for international beef pricing.
Key Points
- July saw weaner and feeder prices rally in line with the wider cattle market.
- Price outlooks for spring and summer are relatively positive with a reasonable season.
- Cattle trading margins look tighter but still offer some opportunity for those with feed in paddocks.
Click on figure to expand
Click on figure to expand
Click on figure to expand
Data sources: MLA, Mecardo
