Month: October 2019

Plenty of price variance across the country

Posted on by Caitlin Dearden

Lamb prices continued to track along sideway in east coast markets, but there were some wild swings in the remote states.  The Eastern States Trade Lamb Indicator (ESTLI) slipped below 800¢ for the first time since May, but things are worse in Tasmania and WA.

NSW has held a strong premium in saleyard trade lamb prices for the last month, and little changed this week.  NSW trade lambs are carrying the ESTLI, sitting at 823¢/kg cwt, while the ESTLI is at 796¢.  In Victoria and SA trade lambs are dragging the ESTLI down, sitting at 767 and 768¢/kg cwt respectively.

It is likely the difference between NSW and southern states is quality related.  There are plenty of sucker lambs in NSW yards, while the smaller numbers in Victoria as being depressed by small pens of old season lambs.

Figure 1 shows that trade lambs in Tasmania tanked, losing 182¢/kg cwt over the course of two weeks.  Yardings are small in Tasmania at the best of times, and this time of year they are even smaller.  With Meat and Livestock Australia lacking quotes for over the hooks lambs in Tasmania it’s hard to get a handle on prices, but the very large discount to Victoria can’t last long.

Tasmania might have cheap lambs, but they had the second most expensive mutton this week.  The Tasmanian mutton indicator sits at 557¢, a small discount to NSW which was at 578¢.

WA lamb prices continued to decline this week, heading towards 600¢.  With strong export demand, we would expect lamb prices to be better in the west, and they are now at an abnormally large discount to SA.

Next week

The bounce in mutton prices this week took its discount back to the top of the 12 month range (figure 1).  This might add a little pressure to mutton values, especially with forecasts for a hot dry spring to come.

Lamb slaughter continues to climb, but demand seems to be keeping up, holding prices steady.  The southern supply flush is still to come, which should bring with it a seasonal price low. It might not be too much lower however.

Cattle in a holding pattern

Posted on by Caitlin Dearden

Cattle slaughter ticked up last week, but prices continued to track sideways.  The market seems to be in a holding pattern in the east, while the WA premium remains strong.

Just when we thought finished cattle supplies were heading for their spring lull, Victoria and NSW found more cattle, pushing slaughter back to a two month high last week.

Figure 1 shows east coast cattle slaughter at 153,000 head, driven by NSW, which had its second largest week of the year.  Victoria also had a strong rally in yardings, but at 27,000 remains small on the national scale, and relative to earlier in the year.

Figure 1 shows cattle slaughter is still tracking above last year’s level, and it’s not too much of a stretch to say the herd remains in liquidation mode.

In contrast, young cattle supplies have been on the decline.  Figure 2 shows Eastern Young Cattle Indicator (EYCI) dipped back to 12,533 head on Thursday, the lowest full week level for the year.  Southern Queensland was the driver in the lower yardings, with the Roma Store and Dalby markets both falling 40%.

The slight rise in the EYCI (figure 3) was more driven by a shift in weightings than any real increase in price.  Wagga was the biggest yard this week, with 13% of the EYCI, and it was priced at 539¢, while Roma, which fell from the top spot was at 470¢/kg cwt.

Over in the west cattle prices are similar to southern values.  The Western Young Cattle Indicator (WYCI) rallied strongly to 551¢/kg cwt, and is close to over the hooks values.  Historically this is a very good price as we approach peak supply season in the west.

Wool re-discovers its mo-jo

Posted on by Caitlin Dearden

This week the wool market opened strongly in the three selling centres, posting gains across all MPG’s of up to 100 cents. Again, the medium merino types found the strongest price increases, although any “Good style” wools with high N/Ktex in the fine types were also highly sought.

By the week’s end 18 MPG in Melbourne had improved 40 cents, 20 MPG 100 cents, and the Cardings indicator were again above 1,000 cents across all centres. A strong result across the board.

The Eastern Market Indicator (EMI) lifted 67 cents or 4.2% for the week, to finish at 1,542 cents.              The Au$ fell slightly to US $0.676. This saw the EMI in US$ also lift by 40 cents to end the week at 1,087 cents.

Western Australia performed strongly on the opening day posting some significant gains which continued in the early part of Thursday. Of concern though, was that AWEX reported that the “fleece market noticeably softened” toward the end of the week. This resulted in falls of 30 – 70 cents on the day, however over the week the Western Market Indicator rose by 59 cents to close at 1,702 cents.

Sellers reacted to the improved market with the National Pass-in (PI) rate for the week 7.6%. Of interest is that the PI rates plummeted this week to 3.0 & 4.0% in the North & South respectively, recording the lowest rates for the past 3 months. It was a different story in W.A., for the week almost 20% was passed, and on Thursday in the softer market, this figure touched 30%.

When looking back we note that while the EMI is currently at 1600, in May the EMI was 1900 cents with a PI rate at 20%. It seems seller expectation has moderated.

27,458 bales were offered to sale with 25,384 bales cleared to the trade (Figure 2). There have been 102,483 fewer bales sold this season compared to the same period last year. This is an average weekly gap of 10,248 bales.

The dollar value for the week was $47.35 million, for a combined value so far this season of $424.93 million.

The week ahead

Next week a larger offering of 40,999 bales are rostered, falling back to around 30,000 in subsequent weeks.

The market appeared to have shaken off its doldrums retracing 64% of its August fall. We have concern though about the weaker market in Fremantle at the end of the week. The increased offering and soft finish this week will be causing stress to buyer & sellers regarding next weeks market.

Down but not out?

Posted on by Caitlin Dearden

There remains a huge amount of uncertainty when it comes to the production of this years’ Australian grain crop. This didn’t stop the ASX wheat market declining.

The ASX wheat market in recent weeks has been like a Mexican stand-off. The spread between the bid and offer was wide and there was limited volume trading. The volume started picking up this week, with the largest trading day on the current contract on Wednesday.

The volume coincided in a fall in pricing. During the week the ASX with buyers happy to come to the table when the price fell. On Thursday last week the Jan 2020 contract was at A$367, last night it settled at A$352.50.

It is likely that the market will remain volatile for the coming weeks, as although we are very close to harvest there is little in the way of certainty.

In other news the International Grain Council revised downwards the Australian grain crop to 31mmt, above last years 28.3mmt but down from the previous forecast of 34.2mmt. The new global result was however unchanged due to increases to European production.

Locally the final chapter on the Grainpro saga was closed. The company which went into administration in October was finally put into liquidation this week. It is reported by the administrators that the company had been trading insolvent for a considerable period. The likely payment back to unsecured creditors, many of which are growers will be 20¢ in the $.

Remember to listen to our podcast

What does it mean/next week?:

The rainfall outlook remains perilous for the next week. Will we see a rebound in prices as risk increases?

Making hay or growing beef

Posted on by Caitlin Dearden

The hay market is set for another hot year.  Supplies have dwindled but there are reports of plenty of crop being cut.  Part of Victoria, South Australia and Tasmania are having good seasons, after dry summers, and this week we look at the numbers on cutting hay, or buying cattle.

Having excess feed is a good problem to have, but deciding how to use it can be tricky.  Hay is expensive, and making it will be preferable to buying in supplementary feed, but the numbers are tighter this year than last.

Last year we went through the costs of making hay in grassfed sheep and cattle operations and the same calculations apply this year.  The cost of making 5t of hay per hectare comes in at $567/ha, or $113/t.

With Dairy Australia quoting good quality pasture hay at $250-300 ex-farm for good quality pasture hay there appears to be a solid margin of $685-835/ha in making hay this year.  Historically we haven’t seen much better margins in hay, but there are always other options.

We know store cattle prices are at all-time lows relative to feeder and finished cattle, so we might be better off converting excess feed into beef rather than selling it to someone else to do the same.

Figure 1 shows some rough numbers on buying 350kg steers and adding 50kgs to take to feeder weight of 400kgs.  We are assuming cattle will take off 5t per hectare, and pastures should be able to handle the heavy stocking rate of 10 steers per hectare at this time of year.  After 60 days cattle should have at least gained 50kgs and possibly more.

Lower end feeder prices of 280¢/kg lwt would result in a margin of $700/ha before any costs were included.  As feeder prices increase the margins improve rapidly.  Angus feeder steers are currently making up to 350¢/kg lwt, which gives a margin per hectare of $3,500, way in front of hay making margins.

What does it mean/next week?:

While making hay will be cheaper than buying hay or grain this year, if grass is surplus to requirements there is likely to be better money in converting it to beef directly.  Obviously there is price and production risk involved in cattle trading, but there is also plenty of risk in making hay.

Those planning to make hay to supplement feed in summer and autumn might be better off trading stock and using the profit to buy grain.  Obviously detailed calculations need to be done on this, but it’s worth thinking about.