Restockers hold sway over market
In the past three years restockers carried young cattle prices higher as they feverishly purchased stock to rebuild herds — will they do it again?
It was farmer money which took young cattle prices to extremely high levels, and now it is the withdrawal of farmer money which is playing a big part in the downward price spiral.
Evidence of this can be seen in the graphic on this page which show the breakdown of the Eastern Young Indicator by the price paid by each of the buying groups – restockers, feedlots and processors.
In the past three years restockers carried young cattle prices higher as they feverishly purchased stock to rebuild herds after the drought. In January last year the buying cycle peaked at an average of 1273c/kg carcass weight, a rate which was 200c above what feedlots were spending.
Since the drought broke – apart from a brief period when confidence took a hit from the Foot and Mouth Disease outbreak in Bali – farmers have consistently paid decent price premiums above what processors and feedlots were paying for young steers and heifers.
And not only were producers paying big money, they were buying good volumes of calves at these inflated prices.
Up until the past month, farmers were regularly purchasing between 15,000 and 35,000 steers and heifers per month in the EYCI – often dominating the feedlot sector in terms of volume.
This trend has massively changed in recent weeks. The number of young calves selling to restockers has fallen off a cliff with the latest EYCI data showing sales to the paddock below 5000 head. This is the lowest volume in more than 3-years
This drop off in farmer demand translates back into the lower price performance of the EYCI. With meat buyers and feedlots facing less competition from restockers, rates for all young cattle have declined and are now trending closer together.
This detailed look behind the EYCI data was prompted by recent comments from farmers pointing the finger at processors or big name companies for the shock collapse in cattle prices. It happened at Yea last week when a disappointed vendor suggested farmers were ‘being played with’ and prices had “dropped too low’’.
The Yea sale was cheaper and grown steers in particular wore a price hit to rarely get above 370c/kg liveweight. But the store market is essentially farmers selling to farmers, although feedlots do operate at times.
The role farmer money and confidence plays in setting young cattle prices needs to be acknowledged more.
Which brings me to another issue. How much impact is all the talk about a possible El Nino weather event or the “tap being turned off’’ and media headlines of ‘Flash Droughts’’ having on livestock producers?
Maybe all the focus on these new beaut weather Apps and constant warnings about ocean temperatures and dipoles has farmers reacting to a dry period that hasn’t actually begun yet.
The bottom line is young cattle prices are being greatly affected by the withdrawal of restocking support, which comes back to farmer money.
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