Before Australian cattle markets went on their long bullish run in 2020, they had some reliable seasonality about them. Cattle prices would generally rise and fall with the seasons, largely based around supply fluctuations. In 2024 we might be seeing the return of seasonality.
Most livestock market participants are afflicted by recency bias. It is much easier to remember how markets
performed last year, as opposed to how they fluctuated ten years ago.
Figure 1 shows just how the price seasonality we used to see gave way to
a massive continuous rally for the two years from 2020 to 2022. The rally was followed by an equally massive
decline in prices, which took just over a year, to bottom out this time in
2023.
This gave us four years of large market swings which had more to do with
nationwide climatic conditions, rather than the swings we used to see with the
changing of the seasons.
For most of 2024, we have seen the Eastern Young Cattle Indicator (EYCI)
trade in a relatively narrow range of 100¢/kg cwt. Before 2020 a 50¢ swing in the EYCI was a
massive move, but after the volatility of 2020-2023, it seems relatively minor.
Looking at the EYCI for the year to date, it is looking more like the
curve we used to encounter when using the Cattle Futures contract in the late
2000s.
Back then the cattle market would start the year on the rise, especially
if summer rain fell in northern areas.
In autumn cattle prices would fall as the supply of cull cows increased,
and stock was offloaded before winter.
In winter and early spring, prices would rise as grass supplies increased
and fewer stock was sold. In October
prices would fall as finished cattle were offloaded before summer kicked in.
Figure 2 shows that the pattern has been followed in 2024, and it fits with
the five-year average EYCI from 2011-2015.
Which brings us to what happens next.
Prices would usually steady or rise in November and December as supply
and demand found a balance. The next
move would depend on if and when the northern wet season kicked off.
What does it mean?
A return to some sort of ‘normal’ seasonality might be on the cards, but much has changed in cattle market dynamics in recent years. The increase in feedlot capacity has no doubt smoothed the supply curve, which might negate some seasonal variability, but it might be important to keep an eye on how markets used to behave.
Key Points
- Cattle prices have shown some seasonality not seen for three years in 2024.
- The EYCI used to move in a reasonably predictable seasonal pattern, with less volatility.
- Some cattle market dynamics have changed, but we might be seeing some seasonality return.
Click on figure to expand
Click on figure to expand
Data sources: MLA, Nutrien, Mecardo
