Another gloomy forecast isn’t going to help
Recent cattle market trends continued this week. Young and store cattle remained on the slide, while support for finished cattle remains. The latest BOM three month outlook doesn’t offer a lot of hope for rising prices for the rest of the year.
There was a bit of rain around this week, but most of it remained close to the coast. As such the rain isn’t going to do much to markets, with little impact on total feed supplies.
There was further rain in Victoria and South East SA, which have been the only area where feed growth has been outstripping livestock demand. The problem is that the grass will only be growing for another month or two, and then supply will lift from the south. By this stage markets will well and truly be looking for the northern summer rains.
The Eastern Young Cattle Indicator (EYCI) actually didn’t perform too badly this week. The EYCI lost 5¢ to hit 473¢/kg cwt, a four month low. It’s interesting to see cow prices (figure 1) maintaining what are relatively strong levels, despite the dry. No doubt close record beef export prices are driving competition for what cows are still surplus to requirements.
Figure 1 also shows the east coast heavy steers maintaining their strong levels. It’s remarkable to see heavy steers not far from record levels, while young cattle are sliding lower.
In the west cattle prices are still showing a premium to the east, at least for young cattle. The WYCI sits at 520¢/kg cwt, but it is behind finished cattle prices, with finished yearlings making 560¢ over the hooks.
What does it mean/next week?:
Figure 2 shows a rather depressing forecast. It should be remembered that it is suggesting there is a less than 35% chance of receiving above median rainfall. For the risk taker a 35% chance of 40% profit might be attractive. The downside risk grows smaller every week we see prices fall.
We don’t expect to much to change in market trends until there is some sort of widespread precipitation.