Category: Cattle

The shortened week due to the Queen’s Birthday holiday saw cattle throughput soften to the lowest weekly level in over a month and a half across the East coast which provided a floor to most categories of cattle. The Eastern States Young Cattle Indicator (EYCI) gained a meagre 0.5% to close at 479.25¢/kg cwt.

East coast cattle yarding levels were 17% softer week on week to see just over 51,000 head change hands at the sale yard (Figure 2). While this is the lowest cattle throughput in six weeks, it still represents a level that is 25% higher than the seasonal average for this week in the year.

East coast cattle throughput continues to remain elevated due to high numbers of cattle continuing to present themselves at sale yards in NSW.  Indeed, every east coast state recorded below average yardings this week except for NSW, which still has cattle throughput running at levels at around 70% above the seasonal average for the last month.

Across the East coast, most cattle price categories posted improvements ranging between 1% to 9%, with East Coast Trade Steers the only category to record a price decline, dropping 4% to 283.9¢/kg lwt (Table 1).

On a side note, our article last Friday made mention of South Australian Restocker Steers that caught our attention posting a 50¢/kg live weight price. The efficient and helpful staff at MLA kindly confirming that this was a valid statistic, albeit somewhat of an outlier as this was based off only a single sale of restocker steers that week in SA.

Further West, young cattle prices eased under the $5 level midweek to see it just 2.5% above the EYCI at 493¢/kg cwt and in offshore markets, the 90CL eased slightly to hold above 570¢/kg CIF (Figure 2).

What does it mean/next week?

With limited rain on the horizon outside of Victoria and coastal WA next week its unlikely to see cattle prices gain too aggressively in the short term. On the flip side, a 90CL beef export price above the 550¢ region and reduced cattle supply as we enter the depths of Winter will continue to provide price support on any dips. Perhaps sideways price consolidation is the order of the day for cattle markets over the coming few weeks.

Another week and another high for slaughter rates. It seems, however, supply may have eased a little this week, as the Eastern Young Cattle Indicator managed to gain ground for the first time in a month and posted its biggest gain since March.

Figure 1 shows cattle slaughter ramped up again in the week ending Friday the 1^st of June. It was in May 2016 when east coast cattle slaughter was last over 150,000 head. Last week slaughter didn’t quite eclipse the 2016 level but was the second highest weekly slaughter since the end of 2015.

Queensland slaughter was relatively steady last week. It was NSW and Victoria where rates jumped, as winter arrived with no real precipitation.

This week the EYCI gained 10¢, which is its best effort since March, to finish Thursday at 476.5¢/kg cwt.  The market will have to gain another 20¢ before we can say the downward trend has been broken.

We might be starting to see the winter doldrums for young cattle supply. The 15,000 head young cattle yarding this week was the second lowest for a full week for the year.

Most of the state indicators were steady to slightly higher this week. One number which caught our eye was restocker steers in SA at 50¢/kg lwt. Hopefully, this was a typo.

In the west, young cattle prices eased, with the WYCI down 11¢ to 532¢/kg cwt. It rained in the west during the week, so at this time of year prices probably shouldn’t be falling. They might bounce back this week.

The week ahead

There looks to be some rain on the way for the Riverina, which might offer a start to the season if it’s followed up within a couple of weeks. This might at least halt some of the supply of young cattle as grower elect to take a wait and see approach.

Southern WA is set to get some more rain, so it’s hard to see prices dropping much further over there as supply is traditionally tight at this time of year and rain will only make it tighter.

The most recent update to the ABS cattle slaughter data shows a jump in the ratio of female cattle slaughtered as a proportion of the total kill. The average annual ratio now sits at 48% signifying that we are technically in a herd destocking phase.

The rainfall deficiencies map for the last three months provides an insight into the driving force behind the increased cull ratio of female cattle with severe deficiencies impacting producers in much of NSW and Southern WA – Figure 1.

Average monthly ABS cattle slaughter figures for the first quarter of 2018 sit 10% below the five-year first quarter pattern. However, the five-year average figure is somewhat distorted by the very high turnoff experienced between the very dry 2014 and 2015 seasons – which was in excess of 9 million head per annum.

An assessment of the five-year first quarter average slaughter levels with the 2014 and 2015 seasons removed shows that the current slaughter levels for the first quarter of 2018 are right on average, at around 1.77 million head per quarter.

While the total cattle slaughter numbers are not unusually high, there has been a noticeable change in the types of cattle being sent to meatworks in recent months. As shown in Figure 2, the ratio of females slaughtered as a proportion of the total kill has increased significantly since the start of the season.

Indeed, the female slaughter ratio has gone from the lower end of the normal range in January at 43.5% to the upper end of the seasonal range in April at 52.6%. The April female slaughter ratio is now nearer to levels experienced during the 2014 and 2015 seasons herd liquidation phase, which peaked at 53% during the winter of these years.

What does it mean?  

The surge in the percentage of females slaughtered as a proportion of the total kill in recent months has lifted the annual female slaughter ratio to 48% for the 2018 season. A female slaughter ratio above 47% is generally considered to be reflective of a herd liquidation phase.

During 2014 and 2015 the average female slaughter ratio from January to April was 50.6% and 50.3% respectively, compared to 48% for the current season. This suggests the liquidation experienced so far this year hasn’t been as pronounced as the 2014/15 phase.

However, the three-month rainfall outlook for winter released by the Bureau of Meteorology last week (Figure 3) points to a much drier than normal period ahead so it is difficult to see the female slaughter ratio backing off too much in the coming months.

The Eastern Young Cattle Indicator (EYCI) continues to trek lower as cattle yardings reach a five-week peak, underpinned by high NSW cattle throughput. The EYCI closed this week 1.1% lower at 466.5¢/kg cwt, while its Western counterpart shed 3.2%. Despite the bigger fall in WA young cattle prices, producers there are still enjoying an 11% premium over their East coast neighbours, with the Western Young Cattle Indicator (WYCI) closing the week at 523.75¢/kg cwt.

East coast cattle prices were posting slightly mixed signals at the close of the week with Trade and Heavy Steers gaining 1-2% while the Medium Steer, Medium Cow and Feeder Steer Indicators softened between 1.5% to 4%.

Across the east coast states, cattle prices reflected either the presence or lack of rainfall during the week. In Queensland most cattle categories were flat on the week, except for Trade and Heavy Steers, acting as market book-ends. QLD Trade Steers are finding it tough with a 5.1% drop to 256¢/kg lwt, while QLD Heavy Steers posted a 2% gain to 261¢/kg lwt. NSW cattle categories are mostly 1-2% softer, with NSW Trade and NSW Restocker steers bucking the trend to see them gain 1.5%. In Victoria, gains were noted between 1-4% for all categories of steer, but Vic Medium Cow was the only disappointment to producers – off 4% to 169¢/kg lwt.

The dry conditions prevalent in NSW and Southern Queensland  pushed additional cattle to market this week and is underpinning the 23% lift in east coast cattle throughput to nearly 72,000 head – figure 1. NSW sale yard yarding levels are remaining the key driver of the higher east coast throughput with a 27% surge in numbers this week to sit just shy of 37,000 head (Figure 2).

The rainfall deciles map for May highlights the plight of cattle producers across much of the country in the past month. Victorian and Tasmanian regions were the only parts of the country to see reasonable areas of average to above average falls, and hardly any below average areas present (Figure 3.) This was a stark contrast to the rest of the nation – and perhaps a mostly red continent embarrassed by a lack Autumn rain.

What does it mean/next week?

The three-month rainfall outlook released by the Bureau of Meteorology yesterday doesn’t paint a great picture for NSW, SA, Northern Victoria and Southern Queensland. Much of the South-East corner of the nation is set for a dry Winter so don’t hang your hopes on a recovery in cattle prices in the near term.

After a brief respite in the downward trend, young cattle prices continued their drift lower this week.  With grain prices on the up, hay in short supply and more depressing forecasts it is no surprise that sellers are taking advantage of what are relatively strong prices.

Young cattle yardings moved to a five week high this week, with EYCI saleyards selling 19,854 head (figure 1). The result of stronger yardings was a fall in price, the EYCI lost another 18¢ to hit a new three year low of 472¢/kg cwt (figure 2).

The lower prices were largely driven by restocker supply increasing and demand weakening. The NSW Restocker Steer Indicator hit 252¢/kg lwt this week, 24¢ below the feeder indicator and 19¢ off the Heavy Steer. There are plenty of little light weaners on the market at the moment, and buyers aren’t exactly lining up.

There was one shining light  Medium Cows in saleyards gained ground in Victoria, NSW and Queensland, pushing the National Indicator 13¢ higher to 370¢/kg, cwt a six week high.

In WA markets are stronger than on the east coast, with the WYCI sitting at 536¢/kg cwt and Cow prices at around 400¢.

Export prices were steady to slightly weaker this week, the strength in the Aussie dollar saw the 90CL Frozen Cow fall 1¢ to 586.5¢/kg cwt. If it does ever rain the market will have some catching up to do.

The week ahead

There is some more rain forecast for Victoria and the border with NSW this over the coming week. While not enough to constitute a break it might be a start when added to last week’s rain, and importantly, if there is more to come.

The three month forecast is not all that positive for dry parts of NSW, and looks dire for WA. For east coast values to rally, somewhere near median rainfall would be needed over the winter in northern NSW, and there is a 40% chance of that. In WA, there is only 25-40% change of median rainfall, which will raise concerns for grass and grain supplies in the West over the coming year.

The beginnings of the Autumn break in the South has placed a floor under cattle prices during the last week with the Eastern Young Cattle Indicator (EYCI) gaining 1.3% to sit just below 490.5¢/kg cwt. Victoria has received some good rain in recent days but the benefit of this change in weather has not been able to extend further North into NSW.

Across the national sale yards most categories of cattle have gained value. The National Trade Steer indicator increased 3% to see it sitting at 284¢/kg live weight, although outclassed by Medium Cows that managed a 5% rally on the week to 357¢/kg live weight. National Heavy Steers one of the few classes of cattle to soften this week albeit marginally, staging a drop of 1% to 267¢/kg live weight.

East coast cattle yardings are 20% softer week on week, reflective of the improved conditions in the South – Figure 2. NLRS report East coast cattle yarding levels of 54,360 head which now sit comfortably within the normal seasonal range for this time in the year and is only 3.6% above the five-year seasonal average.

However, NSW is yet to benefit from the recent rains in any meaningful manner and cattle prices will struggle to gain significant traction while it remains dry here and NSW cattle yardings remain elevated. Figure 3 outlines the recent pattern in NSW cattle yarding with current throughput levels 40% higher than the five-year seasonal average and 37% above the level set this time last season.

What does it mean/next week?

The rainfall forecast for the next week shows light falls are set to continue in Victoria and along the Eastern seaboard of Northern Queensland. Unfortunately, the rest of the country (and sadly NSW) miss out again.

It’s difficult to see a decent mid-Autumn rally in cattle prices beginning while it remains so dry in much of the country. Further sideways price consolidation is anticipated for the week ahead, despite improving beef export prices offshore.

With the Beef Australia conference on in Rockhampton it looks like buyers pulled up stumps for the week and went north. This was evidenced by further declines across most cattle categories, despite some support coming from export markets.

The Eastern Young Cattle Indicator (EYCI) continued its downward trajectory, posting a 13.5¢ or 2% fall to plumb new three year lows of 484.75¢/kg cwt. Our resident technical charting expert is networking in Rocky, no doubt enjoying the weather while the base in Ballarat freezes, but even to this untrained eye there are some interesting trends.

Figure 1 shows the EYCI approaching its five year average, currently sitting at a 23¢ premium. We would think the five year average should offer somewhat of a support level. Figure 2 shows the classic ‘head and shoulders’ charting pattern. We’ve just broken thorough the right shoulder, and look to be headed down the arm.

The five year average is about the elbow, let’s hope it stops there and doesn’t head down to the knees where we were back in 2014.

There was some positive news about. Figure 3 shows the 90CL export price chart we published earlier in the week, with a solid tick upwards in US prices, and the AUD falling below 75US¢, pushing our price back to 590¢/kg swt.

Additionally, most of Victoria, and South East South Australia got some good rain over the last few days. It will be particularly important for parched parts of Gippsland. These areas only account for 4 million head, or 16% of the national herd, so it’s unlikely to move the market too far.

The week ahead

There is still no rain forecast for NSW, so it’s hard to see cattle markets heading higher in a hurry until there is some relief. Grain prices also continue to charge higher, with feed grains heading towards $280-300/t and this will obviously dampen demand from lotfeeders. A real rally in cattle markets is going to require rain, and there is probably still scope for it to head lower if it remains dry.

We’ve been banging on about stronger cattle slaughter in response to dry weather for a while now.  The stronger slaughter has now translated into stronger exports, with April defying the usual trend and putting up some big numbers.

It should be somewhat comforting to cattle producers that the strong supply seems to be finding homes in export markets. Demand for Australian beef remains relatively robust. Figure 1 shows April beef exports were down a marginal 3% on March thanks to public holidays. Exports were however, 32% higher than April last year, and at a four year high for the month.

Japan was again the major market for our beef. Despite the slight month on month fall, exports to Japan were up 3% to their highest level since August last year, taking 31% of our beef.  Korean exports were down 11% on last month, so it would seem Japan are absorbing more high quality beef.

Chinese exports were up 10.5% on March, and a very strong 54% on April last year, hitting their highest level since November 2015 (figure 2). Chinese beef demand continues to grow, and it is slowly heading back towards the boom times of 2013 and 2015. China again went past Korea to become our third largest market, at least for April.

Exports to the US market were down 2.5% on March, but up 33% on April last year (figure 3). Stronger slaughter, and especially female slaughter, this year has increased the supply of manufacturing beef, our main export to the US. The stronger supply of beef, along with increased US slaughter, has seen the 90CL fall 7% in US terms, and 10% in AUD terms.

What does it mean/next week?:

It will be interesting to see if beef exports show the usual bounce in May, which would see them rise around 16%. The way the season and slaughter is tracking it wouldn’t surprise to see a solid increase in beef exports.

With beef still seemingly being sold into export markets at reasonable prices, there is hope that if the dry continues, the subsequent stronger supply might be soaked up at around current prices.  Obviously, if it rains tighter cattle supply will see competition for beef, and improved prices.

Key Points

• Beef exports were down slightly on last month, but much stronger than April 2017.
• Exports defied the usual downward trend in April thanks to stronger slaughter.
• Exports to China hit a 3 year high as the upward demand trend continues.

Perhaps producers are responding to the rainfall scheduled for the coming week a little early, but the decline in cattle throughput at the sale yard over the last seven days have seen national cattle prices stabilize. The story is mixed across the states, though broadly speaking the market looks to have found a bit of a base.

Table 1 highlights the weekly price action for a selection of cattle categories across the Eastern seaboard with all but Medium Cow postinggains. The Eastern Young Cattle Indicator (EYCI), Trade and Feeder Steers are barely unchanged. Medium Steers the best performer, up 6.5% to 264.6¢/kg lwt.

In Queensland, sale yard prices were a little softer across the board with most types off 1-3%. Medium Steers were the laggard in the north, down 5% on the week to 246¢/kg lwt. NSW saw mixed action for its cattle categories, ranging from 5% gains to 5% losses. NSW Restocker Steers proved the best performer, with a 4.5% lift to 268¢/kg lwt and Trade Steers are dragging their feet a bit posting a 4.8% drop to 273¢/kg lwt. In Victoria, all categories bar Feeder Steers saw price rises between 1-8%. Victorian Feeder Steers had a 2% decline to close at 266¢/kg cwt and Heavy Steers put in a stellar effort to finish the week up 7.8% to 279¢/kg lwt.

East coast throughput figures provide a clue to the halt in price declines, with cattle yardings off 43% on the week to see throughput levels test below the normal range for this time in the year – Figure 2. Cattle yardings were just shy of 43,000 head and are now sitting 30% under the average seasonal level based off the last five years of data.

In the West, cattle yardings were also softer, with prices stabilizing to close at 560¢/kg cwt. Western young cattle prices are still enjoying a 13% premium to the EYCI, which finished the week at 496¢.  In offshore markets the 90CL frozen cow indicator trekked sideways to close at 573¢/kg CIF – Figure 3.

What does it mean/next week?’

For the first time in a good while there is 10-25mm of rainfall forecast for a swathe of the Eastern states. This is likely to see a lift in spirits and may also revive the interest of some Southern restockers if it looks to be the signal for the beginning of the Autumn break. Cattle prices should continue to consolidate in the coming week with a slight upward bias if the rains come as hoped.

Meat and Livestock Australia (MLA) released their quarterly projections this week, and while there were some revisions to this year’s projections, the next three years are expected to be largely the same as was projected in January. The herd growth is expected to be a little weaker, but it’s not really showing up in slower herd growth based on the MLA figures.

Figure 1 shows the only real major change in MLA’s projections since January, being the increase in slaughter for this year. The strongcattle slaughter to date has seen MLA lift 2018 slaughter by 1% to 7.475 million head. The lift in the slaughter projection doesn’t account for all the extra cattle slaughtered so far, and we think the annual number might be a bit higher than this projection.

While slaughter forecasts are still well below the bumper numbers of 2013-15, it is still the fifth highest of the last 10 years. The higher slaughter this year isn’t expected to result in fewer cattle coming to market over the coming four years. MLA have left forecasts for 2019-2022 unchanged, with the gradual increase in response to an increasing herd.

Similar to slaughter, MLA have left their projections for the size of the herd unchanged.  Figure 2 shows minimal change in the forecast growth in the herd. The Australian cattle herd is expected to grow by around 1-2% per year until it reaches a 45 year high in 2022.

It’s highly unlikely that the herd will grow in such a uniform manner, as seasonal conditions often throw projections out the window. The current dry spell is likely to see higher slaughter in the short term, slowing of the herd rebuild, and weaker slaughter in the medium term.

Carcase weights are also expected to grow after having a setback this year. Dry weather and lower numbers of cattle on feed should see average slaughter weights fall this year. MLA are expecting carcase weights to grow to a record high in 2022.

What does it mean/next week?:

As long as cattle remain relatively strong, the herd should continue to grow. The current very strong slaughter is still seeing cattle prices above the pre-2015 records, so we can say that cattle prices are still strong.

MLA obviously expect cattle prices to remain strong, as the herd and carcase weights wouldn’t grow unless there was an incentive to produce more beef. The slaughter projection for this year might be a bit low, and if we end up with higher levels, it should see lower slaughter next year.

Key Points

• MLA’s quarterly projections show a small increase in 2018 slaughter, but no change in later years.
• The herd and carcase weights are expected to grow to at least 40 year highs by 2022.
• The stronger slaughter now might see annual rates surpass projections, taking cattle from the 2019 season.