Category: Cattle

A combination of low saleyard volumes and rainfall have helped to shore up the Eastern Young Cattle Indicator (EYCI) this week amidst the Easter and ANZAC public holidays, which have provided limited cattle sale opportunities.

The shortened trading week due to the Easter break and ANZAC commemorations have seen EYCI eligible cattle yardings slump to the lowest weekly levels this season.

EYCI average weekly yardings have dipped to a mere 3,600 head this week, 59% below the levels seen during the Easter hiatus in 2018 and moved well below the normal range (as identified by the grey shaded zone in Figure 1). In contrast, the 2018 Easter dip toward 8,750 head, which occurred in early April, tested the lower end of the normal Easter throughput range.

The low volume of EYCI eligible cattle offered at sales this week has seen the EYCI bounce 3.6% to close at 468.75¢/kg cwt. Reasonable rainfall in southern Queensland and western NSW is boosting optimism (Figure 2).

However, it was a bit of a mixed bag for other cattle types. According to the Eastern States NLRS reported data, Medium Cow gained 9% to hit 205¢/kg lwt. In contrast, Heavy Steers eased 1.3% to close the week at 275.75¢/kg lwt.

In offshore markets the 90CL frozen cow indicator continues to push higher, reportedly cracking above 690¢/kg CIF prior to the Easter break. This is the highest the 90CL indicator has been in A$ terms since October 2015 when US demand for imported grinding beef was running red hot.

Next week

There is some follow-up rain scheduled for this week, particularly for south-east Queensland and Victoria. It is probably too early to call a start to the Autumn break in the south but it should be enough to keep cattle prices firm as we resume normal saleyard operations into next week.

Just when we thought the Eastern Young Cattle Indicator (EYCI) was going to break through last years’ level for the first time in over 18 months, the tap turned off and Easter arrived to disrupt the market. This week the EYCI rally not only stalled but jammed into reverse.

There is some evidence that after last weeks’ supply driven price fall, it was demand disruption which did it this week. With four kill days this week, and just three next week, it’s not surprising to see demand weaken at saleyards. EYCI yardings were down 34% and prices down 6% (Figure 1) suggesting that buyers weren’t keen on young cattle this week.

It was seemingly just young cattle which felt the weakening demand. Finished cattle prices were largely steady, ranging from an 8¢/kg lwt fall for Medium Steers to a 6¢ rise for yearling steers.

Every east coast indicator is above the levels of last year, except the EYCI. The lack of feed around and lack of rain on the forecast continues to dampen prices of lighter store cattle. Those of feeder weights are selling better than last year, but only just. The east coast feeder steer indicator is at 275¢/kg lwt, a very strong 30¢ premium to the EYCI.

A couple of interesting charts to finish.  Victorian, NSW and SA slaughter hit a three year high last week as supply continues to flow in the south (Figure 2). The rain earlier in the month saw supply ease in Queensland, but it ticked up again last week.

Next week?:

Easter is traditionally not a good time to sell cattle. This year, demand disruptions are going to be combined with dry weather and that’s not good for prices.

We’ve got around 10 days to see some sort of an autumn break on the forecast, or cattle prices might head back towards the lows of earlier in the year when markets are back in earnest.  As always, good rain will see better prices.

The Eastern Young Cattle Indicator (EYCI) eased 5% on the week to close at 481¢/kg cwt as limited rainfall and higher throughput conspired to weigh on the market. This move was mirrored across the broader national cattle market, except for the Medium and Heavy Steers.

Improved young cattle prices during late March/early April have seen yarding levels of EYCI eligible cattle lift 42% from averaging over 14,300 head per day last week to 21,250 this week. The result of the increased volume pressured the EYCI to ease 5% after peaking at 507¢ last week (Figure 1).

Improved prices were not the only attraction drawing out young cattle though as limited rainfall across the country this week (Figure 2) saw the daily EYCI cattle yarding reach a peak of 23,803 head on Thursday. This was the highest daily throughput level recorded so far this season.

Higher saleyard volumes on the back of the limited rainfall hampered other east coast categories of cattle with falls in the week between 5¢-15¢ noted. National Heavy and Medium Steers were two of the few categories managing to gain on the week to close at 275¢ and 282¢ liveweight, respectively.

The Bureau of Meteorology released their mid-month preview of the three-month climate outlook on Thursday for the May to July period. The picture of a 50/50 chance of a wetter or drier than average rainfall pattern remains in place, albeit with an increased chance of slightly drier than normal trend for southern Queensland and a wetter prospect for southern WA (Figure 3).

Next week

The only significant rain for the nation next week is scheduled to fall in Western Australia so there will be limited opportunity for East coast cattle prices to recover. Expect further consolidation for the short term as robust beef export prices and healthy processor margins will keep buying support present on price dips, while lack of rain will continue to be a headwind on prices racing higher.

The cattle price rally continued this week but slowed. The Eastern Young Cattle Indicator (EYCI) did break through 500¢ for the first time since very early January and it looks likely to break through last year’s levels.

With little rain about this week and none on the forecast, cattle buyers took a breath and held prices relatively steady. Figure 1 shows the EYCI was due to slow a little. The rally hit 105¢ this week and it has done it in a month. The EYCI was at 505¢/kg cwt on Thursday and right on the five year average.

This time last year, young cattle prices were heading in the other direction. This suggests that this year’s values will surpass year-earlier levels for the first time since July 2017.

Young cattle supply has remained relatively low. It’s unusual for EYCI yardings to remain below 15,000 head for more than a week at this time of year. No doubt producers are holding what cattle they have left to take advantage of some autumn grass growth.

Paddock feeder prices have rallied, but only marginally. Lot feeders never really paid much less for export feeders, so the smaller increase was to be expected. Export feeders are still commanding a 30¢ premium over the EYCI, which is within the historical range, but at the stronger end.

In the West, cattle prices are less exciting. The WYCI was steady this week at 533¢/kg cwt, still stronger than its eastern counterpart, but 45¢ below this time last year.

Next week:

Another 8 days of no rain might start to give the market the jitters. We will move into mid-April with no autumn break and if it’s still like this at the end of the month we might see young cattle values start to head lower again.

It’s difficult to see where slaughter cattle are going to come from through late autumn and winter, so those prices will at least hold their strength.

We are a month into the annual weaner sales in Tasmania and while weaner prices are on par with last season there are some interesting developments when comparing price spreads to the mainland – particularly for the heavier weaners.

Tasmanian weaner prices have eased slightly, down 4% compared to last season, with the average price of 295¢/kg lwt achieved during March for heifers and steers at the Powranna sales. Weaner steers have averaged 330¢, while weaner heifers have earned 260¢.

Figure 1 demonstrates the price trend for Tasmanian weaners, according to weight classifications, with the heavier stock holding their value the best. Prices for weaners weighing above 330kg liveweight are 3.7% below levels achieved in 2018 and weaners in the weight range between 280-330 kg are off 3.6%, not too bad considering the southern restocker Eastern Young Cattle Indicator (EYCI) is 13.4% lower than in 2018.

Analysis of the spread pattern for different weaner weight classification to the southern restocker EYCI highlights that the spread for heavier weaners has been steadily improving since 2015 – Figure 2. This is particularly true for weaner steers weighing above 280 kg liveweight with premium spreads being earned during 2019 that are three to five times greater than the average spread earned over the last ten years.

Indeed, weaners weighing more than 330kg lwt have achieved an average spread premium of 67¢ above the southern restocker EYCI during the March sales, compared to an average of 13¢ premium over the last ten years.

For a full copy of the Tasmanian Weaner Sales Report for March 2019 contact Roberts Livestock

What does it mean?

The surge in the heavy weaner spread premiums can be demonstrated by the percentage spread pattern to the southern restocker EYCI for the last fifteen years – Figure 3. For much of the period the percentage spread premium was confined to a 0-10% range. However, in 2018 the spread lifted to a 17% premium and during March of 2019 has jumped to 30%.

Anecdotal reports from the Powranna sales suggest that the robust demand for heavier weaners was fueled by competition amongst feedlot backgrounder and finisher buyers. Given the expectation of tight supplies of quality finished cattle as we head toward winter the solid demand for heavier weaners now isn’t surprising.

Key points:

• Tasmanian weaners sales are averaging 295¢ kg lwt during March, down 4% from the 2018 average price
• Weaner steers have achieved an average price of 330¢, while weaner heifers are earning an average of 260¢
• Weaners above 280kg liveweight have been achieving premium price spreads to mainland EYCI type cattle that are three to five times higher than the ten-year average spread

A fortnight ago the Eastern Young Cattle Indicator (EYCI) was trading under 400¢ and I made the bold statement that I’d eat my hat if it kept going lower. Thankfully, some significant rain to Queensland in the last week has seen cattle prices rebound. Although, according to the Bureau of Meteorology (BOM) we are not out of the woods yet.

Further to my hat eating comment, Mecardo released analysis in late February suggesting that the EYCI would find some significant support near the 400-420¢ level based on some key technical indicators. Granted, we dipped briefly to 385¢. However, the strength of the rebound in price from the low 400s has been resounding. Yesterday the EYCI closed at 494¢/kg cwt.

Rainfall of 100-200mm has been noted for significant areas of south western Queensland, thanks to the remnant activity of tropical cyclone Trevor helping to boost optimism amongst cattle producers. The updated three-month rainfall outlook released yesterday paints a pretty good picture with almost all the country expected to see a 50/50 chance of an average Autumn break, in terms of rainfall – Figure 1.

There was a caveat included in the forecast and a warning. The BOM noted that the El Nino Southern Oscillation (ENSO) indicator had moved from watch to alert, which means the prospect of an El Nino forming in 2019 is now a 70% chance which is three times the normal likelihood. The BOM warned a move to El Nino could have significant negative impact on the current rainfall outlook.

Nevertheless, cattle prices across the board mirrored the recovery in the EYCI with all NLRS reported categories along the east coast posting gains between 2-13% on the week (Figure 2). In the West young cattle prices softened, albeit slightly, with the WYCI down 3¢ on the week. Offshore, the 90CL frozen cow indicator remains firm with a gain of 2.4¢ to close at 655.5¢/kg CIF – Figure 3.

Next week

The eastern halves of Queensland, NSW and Victoria are set to receive between 10-50mm in the coming week which should continue to provide broad support for cattle prices. Although, given the strength of the rally in the EYCI in the last week I wouldn’t be surprised to see the magnitude of the price increase ease and settle into a consolidation phase for the next few weeks.

It looked like cattle prices were headed into the abyss, but then sellers and buyers alike saw a bit of rain on the radar and started to think they were a bit cheap. And up prices go, quicker than they came down in fact.

After a brief foray below 400¢, the Eastern Young Cattle Indicator (EYCI) retraced the heavy losses of early March this week. Figure 1 shows the EYCI finishing Thursday at 441.25¢/kg cwt. With delayed yarding data it’s a bit hard to gauge if it was supply or demand.

Looking purely at Roma, the country’s biggest store market, calf supply fell from 1,032 head last week to 215 head this week. The good rain through parts of southern and central Queensland obviously had an impact on supply.

While store and restocker prices rallied, most other categories also found some upside. The most expensive indicator in the country remains the MSA yearling in WA, at 580¢/kg cwt. In the east, Victorian Heavy Steers gained 18¢ to get back to 511¢.

Live export cattle prices fell heavily this week, at least in Darwin where Light Steers fell 40¢ back to 300¢/kg cwt. In Townsville prices were steady, but remain cheaper at 285¢/kg lwt. The floods don’t seem to have impacted prices too much.

Export beef prices held steady this week, and remain at the top of their range.  It’s hard to see beef supply improving from here, and forcing export prices lower, but we know that local supply isn’t the only driver of world beef markets.

Next week:

Figure 2 shows follow up rain for parts of Queensland spinning out of cyclone Trevor.  There is a pretty good chance this rain will see cattle prices at least steady, and probably continue to move higher.

The season isn’t assured yet, but as prices suggest, it’s looking a lot better than it was just two weeks ago.

When the Bureau of Meteorology (BOM) say their forecast accuracy at this time of the year is poor they aren’t kidding. Just a fortnight ago I was lamenting the poor rainfall forecast issued by the BOM in late February and just yesterday they issued a complete turnaround. Too bad it hasn’t flowed through to cattle market prices yet.

The April to June forecast shows a 50/50 chance of rainfall exceeding the median from April to June for most of the country, which is a pretty good outlook considering just a fortnight ago half of the country had a less than 20-30% chance of exceeding the median – Figure 1. Indeed, the only significant regions not likely to see rain is the far northern tip of Queensland and that’s a good thing given the recent soaking there.

Unfortunately, the extended dry conditions and the dire outlook from a fortnight ago saw many producers in Queensland and NSW offload cattle, such that East coast yardings have remained elevated for the last few weeks – Figure 2. Since the start of March average weekly cattle yarding levels have been 33% higher than the five-year average pattern across the East coast.

A breakdown across the Eastern states shows that in Queensland weekly yarding levels have been trending above average all season. The average yarding level in Queensland has been 46% higher than the five-year pattern since the start of 2019, but since the start of March this has jumped to 67% above the five-year average.

In NSW cattle throughput has been trending 12% above the five-year average pattern since the start of the year. However, since the beginning of March this has lifted to 50% above the average seasonal trend.

Victoria has been bucking the trend, with cattle yarding levels 23% below the five-year average since the start of 2019 and average weekly levels in Victoria since March haven’t been dissimilar at 24% below the long-term seasonal trend.

The supply of younger cattle in the northern saleyards has seen the Eastern Young Cattle Indicator (EYCI) slide to lows not seen since 2014 and has closed the week at 393¢/kg cwt. We are at crucial support levels now for the EYCI and after registering a mid-week low towards 385¢ managed to see price climb back towards 400¢ in the final days of the week.

In a further sign of optimism Trade, Medium and Heavy Steers along the East coast all managed a price gain this week to see them rally between 15-30¢/kg. Gains were also noted for the Western Young Cattle Indicator (WYCI) and the 90CL frozen cow export price, up 5% and 2% on the week – respectively (Figure 3).

Next week

The spread discount of the EYCI to the 90CL is now in excess of 260¢/kg cwt and is beyond levels that would be considered historically extreme. Indeed, the only time we saw the spread discount extend beyond these levels was during the depths of the 2014/15 drought and it only lasted there for a short time.

Given the updated BOM outlook for rainfall, the fact that we are at crucial support levels for the EYCI, and that the 90CL is continuing to hold firm I can’t help but think that we are at the bottom of the current cycle for the EYCI right now. As the BOM forecast shows we can always be wrong…  but I’ll eat my hat if the EYCI keeps dropping in the next few weeks.