Cattle price expert analysis gives producers plenty to ponder
Cattle restockers are still driving record rates at saleyards, but this latest analysis by our market expert will gives producers pause for thought — amid sobering export signals and weakened beef demand.
IF THE young cattle market is overheated, farmers have no one to blame but themselves.
It is a blunt assessment, but this graph of the price trajectory of young cattle sold to processors, feedlots and restockers in recent months, clearly shows the influence of the season and how farmer investment is the power behind the market.
When the drought started to break in the autumn, restockers spiked prices and held the market at elevated levels ever since as it continues to rain.
The price figures are based on the Eastern Young Cattle Indicator, which is calculated on sale data of the better bred and shaped (they must be C-muscle) vealers and yearlings sold through the major weekly prime markets.
The EYCI officially hit a record price late last week of 795c/kg carcass weight.
The EYCI data can be broken down in a number of ways, helping to give an insight into what is happening across the industry.
The most popular breakdown is by price, and as the graph shows, restockers (farmers buying young cattle to grow out further on grass) are leading the buying field by a fair way.
The following is a price breakdown for the month of September, according to figures provided by MLA.
It reported that:
RESTOCKERS consistently paid more than 800c/kg cwt for young cattle during this period, and in the past fortnight have pushed the average closer towards 850c/kg.
YOUNG cattle to feedlots generally tracked at about the 750c/kg mark in September, and the official gap between their purchases compared with the restocking price was 68c/kg.
PROCESSORS lagged behind, with the price difference between young cattle going to slaughter compared with the paddock extending out to 94c/kg.
As the graph shows, it is a big turnaround on the market trends of the 2019 drought year, when restockers held the bottom price spot and values were a lot tighter across all classes.
The other way to break down the EYCI figures is by volume.
While there has been a drop in the availability of good young cattle at saleyards this spring, the EYCI figures show it has not been a drastic cut.
The number of steers and heifers included in the EYCI during the past five weeks of trading totalled 54,350, MLA data shows.
That is 12,400 fewer than in the same period last year, when 66,757 were sold.
Analyse these figures further, and they show meat processors have been the group struggling to keep pace and secure their market share against the strength of restockers and feedlots.
In the period from September to the first week of October:
PROCESSORS bought 9339 of the young cattle included in the EYCI, compared with 15,344 the same time 12 months ago.
FEEDLOTS bought 23,154 head, compared with 28,318 a year ago.
RESTOCKERS bought 21,857, compared with 23,095.
As the industry heads into October there are signs this volume is shifting in favour of feedlots, for a couple of reasons.
As the season progresses, more weight is appearing in young cattle and with the premium prices restockers are paying it starts to become prohibitive in dollar a head terms.
Pastures are also starting to dry off, particularly in the north, and farmers no longer have the same urgency to restock on to green grass.
Feedlots will also be able to access cheaper new-season grain and fodder soon, giving them some relief in terms of total input costs.
The latest beef export figures also indicate that out of the reduced pool of meat being produced in Australia, sales of higher quality chilled product are faring the best.
So far this year (January to September) Australian exporters have sold 224,733 tonnes shipped weight of chilled beef, which is 1 per cent shy of the volume sent out in the same period in 2019.
In contrast, sales of frozen beef have contracted by 15 per cent down to 568,374 tonnes.
Japan took the No. 1 spot for Australian beef sales in September, amid reports the market is recovering from the hit it took from COVID-19.
However, Australian beef sales to the US and China are much lower than a year ago as the manufacturing meat market struggles against cheaper imports from competing countries and the strong dollar.
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