In the last 6 months, the cattle market has acted like a bungee jump. Big supply on the way down and big demand on the way back. With signs out of the US getting more positive by the week, many will be wondering why we are still on the way back down.
The throughput to start this year has been gigantic, compared
to recent history. According to MLA NLRS data, cattle yardings totalled 574K in
the first quarter of 2023, and with one week to go, Quarter 1 2024 has smashed
that level of supply. With yardings currently sitting at 734K (a year-on-year
growth of 28%), it is no wonder the late 2023 climb has somewhat retraced. Clearly,
the market was looking for a moment to catch its breath and a 36% decline in
saleyard throughput of EYCI-eligible stock this week is just what the doctor
ordered as the EYCI declined just 4ȼ to 573ȼ/kg cwt.
Unseasonal supply has been an anchor to a dry but hopeful feeder
cattle market. In February, saleyard feeder steer throughput was 46% higher
than the 5-year monthly average for February. This week’s 34% week-on-week
decline to 6k head through the yards, (a return to the weekly average for this
time of year) appeared to alleviate some pressure. The National Feeder steer indicator saw a
slight improvement to 3ȼ to 309ȼ/kg lwt. Similarly, the National Heavy Steer indicator
improved 10ȼ to 276 ȼ/kg lwt after heavy cattle supply also declined. Restocker markets were steady or worse off as
the focus is clearly on the forecast.
The 90CL beef price is climbing. The last time it was this
high (262.5 US c/lb) was in July 2022. Furthermore, as per the USDA, feedlot
cattle in the US are staying on feed for longer as access to stock for
feedlotters is limited from a supply and affordability standpoint. With cattle prices high in the US and
fundamentals suggesting they will stay that way, why not make the most out of
the cattle on hand? Particularly when feed is getting cheaper. Whilst more
weight equals more production, which should alleviate some of the
much-publicised beef supply pressure in the States, the next cohort will be on
feed when the market needs them. A big opportunity for competitors like
Australia in late 2024.
Next week
A momentary lapse in supply reveals that the prospects for finished cattle look to be well supported by developments across the Pacific. In terms of the bungee jump, this should limit the extent of the lows in pricing as we approach Winter.
Slaughter capacity and stocking rates are likely to be at the top end of the range, so to get the bungee to bounce back up (or at least steady) a bit of rainfall will be key. Slowing the flow of cattle is needed to smooth some of the market’s volatility.
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The cattle market bungee jump
Next week
A momentary lapse in supply reveals that the prospects for finished cattle look to be well supported by developments across the Pacific. In terms of the bungee jump, this should limit the extent of the lows in pricing as we approach Winter.
Slaughter capacity and stocking rates are likely to be at the top end of the range, so to get the bungee to bounce back up (or at least steady) a bit of rainfall will be key. Slowing the flow of cattle is needed to smooth some of the market’s volatility.
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Click on graph to expand
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Data sources: MLA, Steiner, USDA, Mecardo
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Independent analysis and outlook for wool, livestock and grain markets delivered to you as it’s published
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.
MEET THE TEAM
Our team of market analysts are recognised as leaders in Australian Ag market analysis, providing invaluable insights to help you navigate the ever-changing commodity landscape.
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.