It doesn’t rain grass, but with the long weekend, rain does offer some light at the end of the tunnel for southern livestock producers. With the rain likely to put a rein on supply, and export demand still rampant, prices can only go one way in the short term.
The rain over the last week has seen key southern beef and dairy cattle zones receive what can now be described as a ‘winter’ break. While not as good as an autumn break, a winter break is better than no break at all.
Bare paddocks will take some time to recover, however, this rainfall and expectations of more potential rainfall should ease some concerns about having no feed at all by spring in some parts of the south. Potential spring feed will likely be enough to pull up the supply of all cattle out of the south, impacting young cattle markets, along with processor cows.
Finished cattle markets are generally supplied out of feedlots at this time of year, so the expectation would be that store markets will move higher relative to finished cattle. Finished cattle are likely to experience some upside in sympathy, as processors battle for fewer cattle to fill kill space.
The May beef export data from the Australian Bureau of Statistics (ABS) shows total beef exports (Figure 1) reaching their fourth highest level on record, up 14% on last year. The US and China, up 22% and 55% respectively from last year, remain the big movers. It was interesting to see Canada import record volumes of Aussie beef, taking over 5000 tonnes, up 139% on last year.
We don’t have the space to outline how all cattle markets could react to the rain, but Figure 2 can give a glimpse. Back in early 2020, the northern drought broke, and the reaction in young cattle markets was immediate. Cow prices also moved sharply higher, but the move paled in significance.
There are a few differences this time. The area and cattle under drought conditions are a smaller proportion of the herd, and the herd is much larger now than it was then, by a factor of around 10%.
What does it mean?
Drought-stricken farmer’ minds will be turning to getting through to spring, then how to rebuild their herds. This will limit cattle sales out of the south, especially if rain keeps coming and water supplies are rebuilt. In the north, abundant feed is driving demand, so expect store cattle prices to improve and drag other categories with them.
Key Points
- Southern cattle producers who have received rain will tighten up stock sales.
- Beef exports are still extremely strong, as are manufacturing beef prices.
- A sudden tighter supply could see young cattle prices jump higher in the coming weeks.
Click to expand
Click to expand
Data sources: Mecardo, MLA, ABS, DAFF
