Trading opportunities emerge in tough market

Buyers are showing caution towards the current cattle market, but the metrics show there are opportunities for trading. See the latest analysis here.

“A year ago, we couldn’t hold people back at $2200 and $2300 for young steers. This year we can’t get ‘em to go.”

It’s a telling observation made by Elders auctioneer Oliver Mason at last Friday’s feature store sale of 4000-plus weaner steers and heifers at Wangaratta.

Of all the issues facing producers this season, the challenge of mentally getting your head around livestock prices and the dramatic change in values has to be up there with trying to follow the weather forecast.

Negativity is swirling. But there are also trading opportunities, as the data shows.

The Gordon Sinclair Memorial spring weaner sale at Wangaratta is held each August and has the numbers and quality to show some valuable insights over time.

This time last year, the average steer price at this market was $2147.40, working out at 669c/kg liveweight. As the graphic on this page shows, this money was hugely inflated over the ruling rates for feeder steers and heavy slaughter steers.

Riding a wave of confidence meant store buyers were keenly paying around 250c/kg liveweight more for store steers compared to what they were getting for heavy bullocks (which were trending under 400c/kg liveweight last August, according to NLRS data).

Fast forward to now, and there is a reluctance to commit to store cattle at much closer to price parity, which is a safer trading bet and puts most of the weight gain for steers into the buyer’s pocket.

The huge crowd at the Wangaratta spring feature sale. Picture: Jenny Kelly

Last Friday, the average steer price at Wangaratta was $1037, working out to 318c/kg liveweight. To refer to the graphic again, on paper, at least, this year is the best trading opportunity for young cattle since the drought year of 2019, as prices are more tightly aligned with returns for finished animals.

From a risk perspective, current cattle prices offer more potential upside compared to the past two years when the market was tracking at record highs. Yet more caution is being shown.

It all comes down to confidence and mental attitude, and it is reasonable to suggest a fair component of the industry is currently bogged down in negativity, El Nino fears and trying to crystal ball how low it can all go.

Heifers are wearing the brunt farmer of farmer caution towards the beef market and season.

Selling agents at Wangaratta suggested that less than 5 per cent of the young females sold last week were destined for future breeders. This compares to an estimated 80 per cent plus, which were purchased last spring to put with bulls as people tried to get onto the then-gravy train of producing $2000-plus weaners.

online artwork aug 23 jenny kelly

The average heifer price at Wangaratta last week was $698 or 238c/kg liveweight, against $1843 or 610c/kg liveweight a year ago.

The dull heifer market coincided with the release of data suggesting the ratio of females in the cattle kill is now high enough to put the Australian herd into a liquidation phase. The tip was to expect bull sales to take a big hit in the coming weeks as the desire to increase numbers and breed cattle wanes.

The cattle cycle has turned, and market conditions which had been favouring breeding operations by delivering big money for calves, have now changed in favour of traders who can buy in at much lower costs.

Nutrien auctioneer Daniel Fischer said his advice was for producers to look at the current situation clearly and avoid getting caught up in what prices once were or what the market could do, mainly if they had reliable feed coming.

“I think people have to keep trading and hanging onto (expensive) cattle to try and get out of them with weight gain is not the right attitude in my opinion,” he said.

“Turn over and get into some cheaper young cattle while the opportunity is there.”

The majority of cattle last Friday were sold to buyers in the south who are guaranteed reasonable spring feed, showing a market segment that can see the value in weight gain off a liveweight cost similar to feeder returns.