Cattle on Feed

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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Data sources: MLA, Steiner, USDA, Mecardo

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