Differing price results for cattle and lamb
When it comes to the difference in lamb and cattle prices this winter, it’s a tale of two seasons.
RECORD prices and falling prices. Are there lessons to be learnt from the differing market results playing out for cattle and lamb this winter?
Young cattle prices officially hit new highs last week, with the rolling saleyard average for young steers and heifers reaching the equivalent of 771c/kg carcass weight.
It is big money to the tune of the EYCI now being 280c/kg higher than the drought-depressed rates of 12 months ago.
It is a different story for export lamb.
Saleyard rates for heavy lambs continued to drop, with the national indicator now at 834c/kg cwt or nearly $1kg less than last June.
If you isolate the extra heavy lambs weighing above 30kg cwt, price results are a lot lower, at about 750c/kg, based on data from NLRS reports.
The question it raises is: Could there be a sting in the tail for cattle from the coronavirus saga?
After coasting through autumn, the market seems to be succumbing to the combination of a lot of lambs with weight and a drastic drop in demand from food service and restaurants due to COVID-19 lockdowns.
While the spin on the latest export figures for lamb attributed the slowdown in shipments during May to less production and slaughter, buyers said the picture was more bleak than that.
“Trying to sell lamb overseas has become difficult if not disastrous,’’ one export buyer told The Weekly Times at Bendigo earlier this week.
“Lamb is a meat that goes into restaurants and food service in places like North America and China, and those outlets just aren’t there any more.’’
In May, total lamb exports from Australia dropped 39 per cent to 17,900 tonnes.
Sales to the US, which is the key high value market for Australian lamb, fell 33 per cent.
Analysts have said lamb missed the consumer spike during the peak of the coronavirus pandemic when people went searching for meat to prepare at home, as in many countries the product is deemed difficult to cook or too expensive against other protein.
In contrast, there have been some benefits for beef.
The rush on grinding beef helped pull cow prices higher at saleyards, with the low Australian dollar a bonus for exporters.
At the same time the early autumn break ramped up restocker demand and pushed young restocking cattle prices higher.
When the record EYCI price is broken down by buying group, the figures show how restockers have carried the young cattle market to new heights, just as it has in the past.
On the day the EYCI hit a record last week, the average price paid for steers and heifers was as follows:
RESTOCKERS - 802c/kg cwt.
PROCESSORS - 720c/kg.
FEEDLOTS - 755c/kg.
Analysts believe the boom season could continue to give the cattle market some protection in Australia as farmers restock.
And this could be needed, as on paper at least, there could be a sting in the tail looming for beef (just like lamb) as the fallout from all the market distortions due to coronavirus play out.
Some of the scenarios being suggested for the US beef market in coming weeks and months could pose problems for Australian exporters.
Already, the price of grinding beef in the US has started to soften as the country’s cattle kill gets back to normal after numerous plants had to be shut down due to high virus infection rates among meatworkers.
The Steiner Group, which is a leading meat analyst company in the US, this week said there had been a dramatic change in beef values as more product became available.
It cited cuts such as beef rounds and chucks as an example.
A few weeks ago these secondary beef cuts were worth as much as three times the value of grinding beef.
Now they have collapsed below the ruling manufacturing beef rates and will probably be diverted to grinding for mince.
This could affect cow prices in Australia soon.
The real sting from what has been happening with cattle production in the US, however, could still be looming.
This week the Steiner Group estimated there could be an extra one million cattle in American feedlots that have been on grain for more than 150 days, an increase of 45 per cent on levels about a year ago.
This is likely to show up in increased beef production later this year, giving US exporters more scope to sell overseas while also dampening its domestic prices.
Looking further ahead, it is now suggested that US beef production will ramp up by 3.4 per cent next year.
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