The market has kept on sliding in the winter ice this week, with yet more signs that supply into the market is continuing to increase. Down went the EYCI, and the WYCI too, as well as all other categories this week. Alarmism in the market about FMD is probably overrated at this stage, and most producers seem to be sitting tight.

Good news was hard to find this week, but at least slaughter is increasing. Slaughter numbers for week ending 15th July, 2022 were up 2% week on week, with most of the impetus coming from a 3% uptick in both QLD & NSW.

The official yardings numbers for last week came in showing the big recovery we suspected had occurred last week, clocking in a 77% week on week increase to 41,144 head on the east coast.  With the logistics issues caused by heavy rain in NSW and QLD having eased, cattle came pouring back into the markets, with  QLD yards reporting a 181% week on week increase, and a 39% increase was achieved in NSW. Selling interest also picked up in VIC by 7%. 

There is talk in the market of LSD and FMD risks, and the potential for a resultant price crash spooking producers, but the trend toward higher selling pressure well and truly predates this. This suggests that biosecurity anxiety is probably more of a contributing, rather than primary factor that’s pushing supply up. What we can take heart from is that our detection systems are working, with the affected pork floss recalled, and Indonesian passengers successfully busted with meaty treats in their suitcase at the airport. Either way, there is a pretty low likelihood that most average consumers of pork floss buns, or prized smuggled spicy sausages will be feeding their lunch to the local cows or goats, given they are more likely to live in the CBD, or Box hill, rather than Ballarat or Warrnambool.  

The canary in the coalmine that is eligible yardings was looking a bit woozy and overfed this week, with the EYCI eligible yarding’s surging yet again, posting a 22% week on week lift to 16,030 head. From analysis done last time we took a close look at the EYCI index components  we can see that 16K is a very high, if not a record level of supply since 2020. This time last year, volumes did not breach the 13K mark, and were well below that for the majority of July. In recent years, supply of up to 20K per week has been seen, so we could see supply increase further.  (figure 1) Feeder steer index contributions were up 19%. All this suggests that supply for this week was probably in the 47K-50K head range.

The increased supply in the market put pressure the EYCI, falling down another 29¢(3%) to 948¢/kg cwt. Steers traded at 1037¢/kg at Roma store, and 963¢/kg in Dalby, and 989¢kg at Wagga.

In the west, the WYCI took another huge tumble losing a massive 113¢(11%) week on week, down to 891¢/kg, despite the support of a 16% reduction in eligible yardings, offset by a decrease in the vealer proportion to 52% for the week. Steers traded at 826¢/kg cwt, while vealers fetched 1044¢/kg cwt.

The National cattle indicators notched up another week of consecutive losses, with feeder steers winning the wooden spoon price for the heaviest decline of 4.4% to 463¢/kg lwt. All in all though, given the very strong yarding, prices held admirably given the circumstances, suggesting that quality in the offering, or underlying demand my have improved this week.

The US frozen cow 90CL price slipped back 7¢(<1%) in Aussie dollar terms, closing the week at 858¢/kg swt. Steiner reports that imported 90CL is now trading at parity with US domestic product for the first time in a year. High supply of local US meat, plus solid inventories in freezers just aren’t giving buyers incentive to pay up for the imported product at this time. Disturbingly, Steiner postulates that there is potential for Australian 90CL to trade at a discount to US domestic product by 2023

The week ahead….

We are seeing increasingly strong trends toward higher supply into the market, and both restocker interest and slaughter just doesn’t seem to be keeping pace this year. Young cattle supply is probably at one of the highest levels achieved in almost three years and has the potential to increase further given the large herd size we are currently carrying. The next few weeks will be critical to assess how strongly the tide of supply will flow, spurred on by downward spiraling prices.

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Data sources: MLA, Mecardo

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