Month: August 2018

Heavier cattle performing better than last year.

Cattle prices managed to hold their ground this week, which is not unusual for this time of year. There are interesting figures for some categories, notably cattle with weight, as they are now more expensive than this time last year.

The Eastern Young Cattle Indicator (EYCI) held steady this week, holding on at 497¢/kg cwt and sitting 86¢ below the same time last year (Figure 1). Demand for light young cattle is vastly weaker than this time last year and this is keeping the EYCI at or around the 500¢ mark. We can see in Figure 1 that this level was reached in 2017, but only briefly in October.

The NSW Heavy Steer spent its second week above the 2017 price (Figure 2).  Demand for heavy slaughter cattle remains strong, and supply is obviously hard to find, especially for grassfed cattle, as there simply is very little grass out there.

Export Feeder Cattle are also finding plenty of strength, with the Medium-Fed Feeder sitting this week at 340¢/kg lwt (Figure 3). The Medium-Fed Feeder had gained 12% since the start of the year and is now just 5¢ below this time last year.

It is also hard to get weight into cattle for feedlot weights at the moment, hence the very strong prices for heavier feeders.

Export prices, as represented by the 90CL Frozen Cow export price, continue to tick a bit higher this week. The 90CL sits at 579¢/kg swt, 32¢ below the same time last year, so we could even say Heavy Steers are priced better than this time last year.

What does it mean/next week?:

The forecast suggests we’re in for another dry week for NSW and Queensland and as such, there will be little impetus for a rise in the EYCI. Higher rainfall areas of Victoria and SA are receiving something of a normal season and will likely be able to supply cattle as normal this year. Whether the demand for weaner cattle is there at the end of the year will obviously depend on rainfall in the north.

Hilltop lambs in the nosebleed section

Robust lamb prices have been encouraging Victorian producers to come forward with lambs earlier than usual, but a dip in throughput this week has seen the Eastern States Trade Lamb Indicator (ESTLI) rocket to a breath away from the 800¢ barrier.  

Trade lamb prices across the East coast during July have been averaging 21% above this time last season and the strong performance has been inspiring producers to come forward with stock, particularly in Victoria.

East coast lamb yarding levels have been trending 23% above the five-year pattern for the first three weeks of July as highlighted on Figure 1. East coast lamb throughput boosted by Victorian numbers which had been trekking nearly double the normal levels during July attracted by prices above 700¢.

However, this week East coast lamb yardings eased 9%, moving back into a more normal seasonal range and the result of the relatively tighter numbers at the sale yard was to see a 5% price spike for the ESTLI to close yesterday at 798¢/kg cwt.

In a classic example of text book Economics, East coast mutton did the exact opposite to lamb, as the increased numbers of sheep recorded at the sale yard this week pressured the mutton indicator down 7% to close at 480¢/kg cwt.

East coast sheep yarding continuing to trend well above the seasonal average and above the normal range that could be expected for this time of the year – Figure 2. Mutton yardings jumping 15% on the week to sit 48% higher than the seasonal average.

The jump in local lamb prices flowing through to higher offshore prices this week with the ESTLI in US$ terms climbing to 590 US¢/kg – Figure 3. It’s interesting to note though that during the 2010/11 season lamb prices in US terms have been higher than where they are now, despite the record local prices. Indeed, when the A$ was above parity against the US$ in 2011 saw the ESTLI in US terms peak at 673 US¢. Mathematically speaking if the ESTLI was to reach toward the 670 US¢ level with an A$ back at the 75US¢ level that would translate to an ESTLI in local terms of around 890¢.

What does it mean/next week?:

It’s unlikely that we will see the ESTLI get to 890¢ this season with the Spring flush approaching. Even if there are less Spring lambs around this season, which is quite likely given the dry conditions we should still start to see the normal seasonal Spring price decline as we head out of Winter.

Some reasonable rain falls for WA and Victorian sheep rearing country is expected for next week but probably won’t be enough to support another strong rally in prices with them already being up in the stratosphere as it is. We are in nosebleed territory at the moment with these high-altitude lamb prices so it wouldn’t take much to see a little bit of a dip back toward the mid 700¢ region in the coming weeks.

We have lift off.

The wheat market is firing on all cylinders. We are going to the moon. The pedal is to the floor. We are cooking with gas.  These are a few appropriate analogies for the market movement this week. In this article we look at the price movements in Australia and seven other markets around the world.

The ASX east coast wheat coast contract has been on a steady climb over recent weeks however this week the market has been on fire. The price has increased a whopping $27 since last Friday (fig1). This is because of continued dry conditions on the east coast in conjunction with the flow on effect from the wider worlds woes.

It is a catch-22 for many, as although prices are high many are not able to take advantage due to lack of production especially in northern NSW/QLD. The high price is very unlikely to mitigate for the loss in yield. The producers in Victoria and parts of South Australia with reasonably good crops will all going well be able to take advantage of the benefit of inflated pricing.

As alluded to earlier, conditions in other parts of the world are on a downward trend. In last weeks update I mentioned that northern Europe is in dire straits. The last few days of harvesting are pointing to this resulting in Europe’s export capacity declining. This has resulted in futures around the world rising, with the majority of wheat exporters now seeing year on year declines in exportable surplus.

In the last fortnight the different wheat futures around the world have seen solid gains (fig 2), with only between 3-4 days of negative results (dependent upon bourse). It is going to be an interesting month as we gain more resolution on the northern hemisphere crop.

What does it mean/next week?:

In Australia the lack of rainfall is likely to result in continued strong pricing well into the 2019/20 season on the east coast.

The commitment of traders report will likely see an increase in the long (bought) position in wheat by speculators. At some point they will likely want to take their profits leading to some price correction. Nonetheless the fundamentals are supporting these strong levels, especially in Australia.