Still a margin in buying extreme priced weaners

The Eastern Young Cattle Indicator (EYCI) hit yet another record last week. The 930ȼ/kg cwt record converts to just over 500ȼ/kg lwt, yet another milestone for the young cattle indicator. Weaner cattle are still making a healthy premium over the EYCI, and here we look at whether there is any money in buying light cattle.

We thought young cattle started the year at extreme values, but the continued good season has seen prices continue to rally.  While the most recent lift in the EYCI is being attributed to feeder demand, weaner steers are still making over 600ȼ/kg lwt in many cases.

Figure 1 shows the EYCI is 23% higher than the same time last year, and a remarkable 90% over the same time two years ago.  All indications are that the EYCI is going to struggle to make further gains, and the slowing of the rally is a testament to this.  This sits pretty well with the normal seasonal pattern, with winter marking supply lows, although normal seasonal trends have gone out the window in recent years.

If we are somewhere near the top, the question is whether those looking for light steers to background should be paying extreme prices.

Obviously to assess the value in weaner steers we need to make some assumptions about future prices.  Current prices for export feeder steers and heavy steers can be considered close to the best-case scenario.  Light cattle bought now and put out on grass won’t be sold until early summer.  A 5% fall could be expected, with the worst-case scenario being a 15% decline.

A tight spring and higher grain prices could see feeder prices fall in the order of 15%, but it seems unlikely. 

Figure 2 shows there is some margin in buying weaners at 600ȼ/kg lwt.  If feeders or finished prices can remain within 5% of current prices weight gain will trump the fall in ȼ/kg value to offer a reasonable return.

Commodity Conversations

What does it mean?

Cattle traders are getting more comfortable with the extreme prices they have to pay, and it is largely because feeder and finished prices are also maintaining their highs.  Confidence in markets is holding store prices, and seeing them creep higher.

Given the reasonable margins shown in figure 2, don’t expect store prices to ease too much until either the feed supply wanes, or feeder and finished prices start to eat into margins.

Have any questions or comments?

We love to hear from you!

Print This Post

Key Points

  • Record young cattle prices are being driven by feeders and restockers
  • Feeder and finished cattle prices are likely to fall in late spring and early summer.
  • With a mild decline, there is still some margin in growing out weaner steers, and this is supporting store prices.

Click on figure to expand

Data sources:  MLA, Mecardo

Make decisions with confidence- ask about our board packs, bespoke forecasting and risk management services

Have any questions or comments?

We love to hear from you!
Cows in a field
Cattle

The EYCI has fallen!

No new records set this week, the EYCI has fallen, but fortunately not to an earthshattering degree. However, the heat seems to have come out

Read More »
Cattle

Roma driving the EYCI-1000

It’s hardly a surprise, but the EYCI has breached the 1000ȼ/kg level and Roma, QLD, has been one of the main contributors to it reaching

Read More »

Don’t have an account with us? Join free.

You can have full premium access to all of our content with a monthly or annual subscription. 

Alternatively, create a free account to access our Insights blog and two free premium article a month!

Independent analysis and outlook for wool, livestock and grain markets delivered to you as it’s published

Commodity conversations podcast cover image, a illustration of a sheep standing on a cow's back with grain either side
Listen to the podcast

Join the Mecardo team for the Commodity Conversations podcast, where we provide short weekly market recaps and longer conversations with guests to discuss the drivers and trends in livestock, grain and fibre markets.

Photo of a farmer surrounded by Merino sheep in dusty yards
Research: Analysis of the Australian sheep flock

In this report for LiveCorp and MLA, we analysed the historical trends in the demographics of the Australian sheep flock, examining domestic factors that influence farm-level enterprise decision making. 

Image of harvested grain pouring into a chaser bin
SERVICES AND CAPABILITIES STATEMENT BROCHURE

We don’t just bring you the most up to date market insights. Find out more about Mecardo’s services including risk management advisory, modelling, benchmarking, research & consultancy.