Cattle prices: Northern demand pushes rates past $10/kg
The Eastern Young Cattle Indicator is just cents away from potentially hitting $10/kg for the first time. See a breakdown by sale of what prices were fetched.
Cattle have hit the magical $10/kg mark with NSW and Queensland restockers hellbent on rebuilding herds pushing prices further into record territory.
The Eastern States Young Cattle Indicator climbed to yet another new record of 988.11c/kg yesterday, after hiting 974.99c/kg on Tuesday and reaching 960c/kg carcass weight on Monday.
The relentless rise of cattle prices has left analysts scrambling predict when the red-hot run will end, with several dramatically revising forecasts to now predict prices will not peak until late spring.
The EYCI has risen 48c/kg in the past four weeks and 211c/kg in a year.
It comes as winter supplies tighten, especially on heavier cattle, and buyers with contracts continue to fork out big money to shore up numbers.
The EYCI is influenced mostly by yardings in the north at this time of year where prices for young cattle are eye-wateringly high — above 1000c/kg on average throughout sales, in some cases for the first time, in some Meat and Livestock Australia-recorded saleyards.
Those averaging more than 1000c/kg last week included Wagga Wagga, Tamworth, Armidale, Casino and Singleton.
Conversely, five of the Victorian yards recorded small sales and the lower-EYCI recorded prices of the past week, mostly in the 809-864c/kg range.
Demand for young cattle continues as forecasts firm up for a back-to-back La Nina with the US Climate Prediction Centre last week releasing a La Niña Watch.
Global Agritrends analyst Simon Quilty said he now tipped the EYCI would top 990c/kg and heavy steer and cow prices would rise 8 per cent by October-November, before easing. This, he said, was due to what has turned out to be prolonged drought-induced herd liquidation and rebuilding.
Global beef exports volumes were down 13 per cent on last year, Mr Quilty said, a huge drop he had “never in my lifetime witnessed”.
Other factors were a shortage of skilled labour which forced processors to keep throughput as high as possible to retain all available workers, and a fall in calving rates of three per cent nationally.
Gippsland producer and Victorian Farmers Federation livestock president Steve Harrison said the current rates were “very good and allowed for a significant margin and for producers to upgrade their facilities and reduce debt levels”.
“The timing has been tremendous for Victorians and many people bought a lot of cattle out of NSW and did very well,” Mr Harrison said.
He said there was a strong correlation between rising beef prices and land prices but he doubted the sustainability of property values. “Without a doubt it has been beef prices have driven land prices; but people must be doing sums that I can’t to make pay,” he said.
Redesdale’s Glendan Park Hereford stud principal Alvio Trovatello said returns were “awesome and it filters through to everyone”.
“It is pretty amazing, I only hope it’s sustainable and others can make a dollar down the line, including processors and that end users don’t turn away from the product and buy chicken or lamb instead,” Mr Trovatello said.
AuctionsPlus analyst Tim McRae said he could now not see any strong reason for young cattle prices to ease, for at least three to five months. Unless predicted rain did not fall.
Yet, he was concerned “the shock is gone that prices keep going higher”.
“Producers are getting used to this and as someone said to me recently, we’ve got to remember this is not real,” he said.
“But, I cannot see what will bring it down, in the short-term, there is usually something to watch out for, but I don’t see that now, unless the forecasts (for rain) are wrong.
“I have been proven wrong four times, but I can’t see a factor now that is going to bring the market back until the first few months of 2022.
“Conditions are good, the outlook (for meat sales) is good and so the question becomes when do you see an influx of supply (of cattle) or when will conditions be right for some turn-off and that is late summer.”
Mr McRae said heavy cattle, and steers over 330kg suited to feedlots, had made the biggest recent gains.
Analyst Matthew Dalgleish from Thomas Elder Markets said he believed current prices were “likely” to be the highest cattle producers would ever see.
“I would not be surprised if what we are seeing right now is it,” Mr Dalgleish said last week.
“You never know when it is going to hit the peak, but if I was still working in currency trading I would be selling it all here.”
However, while prices were likely to begin to ease, Mr Dalgleish isn’t calling a market crash.
He tipped prices could remain in the 900c/kg range for young stock throughout the remainder of the year.
Mr Dalgleish said cattle supply was likely to remain tight for three seasons and prices in the “low 900c/kg” for the remainder of the year.
By 2023 he predicted prices could revert to “the low 800s to mid 700s”. Historically, these prices were still high relative and the only major disruption he could see was “a massive drought”.
Rural Bank analyst Michael Curtis said the bank expected prices to ease later this year, with the peak “now or not far off”.
Mr Curtis said now there were still plenty of factors supporting high cattle prices including seasonal conditions backing restockers and Covid recovery internationally improving food service demand.
He said the five year average of the EYCI was s in the 630c/kg range but it was too soon to say when prices might return to a level closer to that figure.
EDITORIAL: ENJOY THIS MOMENT IN THE SUN
It is easy to forget, when things are good, just how unrelenting and physically, mentally and emotionally tough farming is.
Even when prices are good, but especially when they are bad. And despite this week’s record high cattle prices and how good they look on a graph, it is worth keeping in mind that not all producers have been at the point in their production cycle or farm development where they can cash in on the good returns and enjoy the boom times without a burden of drought or debt recovery.
While celebrating the good times is what keeps us motivated, the broader supply chain and community should be mindful fat pay cheques are unlikely to remain aligned with good seasons and demand in perpetuity. The broader industry should be careful not to see producers as a long-term cash cow to plunder.
The health of the primary producer business underpins the health of the broader industry and if input and fixed costs were to rise substantially in this boom period that will make any correction bite that bit harder.
In fact, as we have recently reported, despite the high prices, the real returns on assets in beef businesses throughout Australia have actually declined in the past 20 years. Ballooning land prices, out of step with land’s long-term earning capacity, is the leading reason.
And of course there are other concerns that come from a red hot market, with processors feeling the squeeze, a shortage of meat workers and the potential for consumers to turn away from beef to other proteins.
But, enough of the what ifs.
While the rain falls, the grass grows and the buyer pays, why shouldn’t producers turn their faces full to the warm sun and enjoy their moment.
MORE
Report into foreign ownership of Aussie farm land finally released
The tax office has released its report from the register of Foreign Ownership of Australian Agricultural Land, 17 months late.
Farmers question taxpayer subsidies for electric trucks
The federal government is awarding millions of dollars’ worth of grants to some of Australia’s biggest businesses to purchase new electric trucks.