28 Mar Rain and Black Swan not related
There were good reasons for cattle prices to rise this week. Demand was up, from restocking and processing sectors, while supply was down. There were two main reasons, widespread rainfall, and the good old ‘black swan’, which flew in from Brazil.
In reality the widespread east coast rainfall would have been enough to halt the gradual slide in cattle markets. Almost all major cattle areas in Victoria and NSW got between 25 and 50mm, while in Queensland it was the far west, and south east which missed out.
On the back of the rain, supply tightened. Figure 1 shows that Eastern Young Cattle Indicator (EYCI) yardings were steady on last week. However, it should be remembered that last week included a public holiday in Victoria, so supply could be said to be weaker. Indeed, EYCI yardings haven’t been this low in a non-holiday week since 2013.
Young cattle prices rallied, but you might expect a bit more. The EYCI gained 11¢ for the week to reach a five week high of 622¢/kg cwt. NSW and Queensland were the main movers, with feeders and trade steers gaining ground, while in Victoria prices were steady.
Heavy Steers were the biggest movers in slaughter markets, with Qld gaining 31¢ to 524¢/kg cwt, and NSW 25¢ to 578¢kg cwt (figure 3). There was little movement in Victoria, but prices were already in the 570-580¢ range.
It could be speculated that improving demand for grassfed export beef, the type produced by Brazil, has already started to filter through to cattle markets.
The week ahead
The better conditions are not going to go away soon. The improved demand for slaughter cattle could easily dissipate next week, but it’s very uncertain. What we can expect is tempered downside in young cattle from here, as there will be some pressure over the coming months, but improved restocker demand should soak it up.