Tag: Articles

A new record for the 90CL

Posted on by Caitlin Dearden

Cattle markets continued to track sideways this week, with very little in the way of major movements in most indicators.  We did see the Bureau of Meteorology (BOM) update their three month outlook yesterday, which is a little more promising, but not much, while the record for 90CL to the US was finally broken.

The 90CL indicator has been creeping towards a new record high over recent months, and it finally broke through last week.  In Aussie dollar terms the 90CL hit 750¢/kg swt, moving higher than the September 2015 high (figure 1).

The driver was values in US terms, with US buyers apparently unable to get product from New Zealand.  This put Australian processors in the driving seat, and able to negotiate values higher.

East Coast cattle slaughter didn’t seem to take a breather for either the AFL or NRL public holidays.  Cattle slaughter did fall slightly from the second last week in September, but it remains above most weeks since mid-June.  Cattle slaughter is well above this time last year, and looks like it will remain there.

Heavy slaughter continues to be counterbalanced by strong export demand.  Figure 2 shows the Eastern Young Cattle Indicator (EYCI) continues to move sideways, defying dry weather and plenty of cattle on the market.

It was this week last year the EYCI took off with some rainfall improving conditions.  It is hard to see a similar rally at this stage, with little rainfall on the short term forecast.

Next Week.

Record export beef prices are no doubt supportive of cattle prices, but it will take rain to see a significant rally.  Figure 3 shows the BOM 3 month outlook released yesterday.  There is a lot less brown than the last forecast, but key cattle areas are forecast to remain drier than normal.  But on the positive side, a 30% chance of above median rainfall means there is a 30% chance of a solid price rise in the next 3 months.

The market giveth, and the market taketh

Posted on by Caitlin Dearden

The concerns we expressed last week about the weak finish to sales in Fremantle came to fruition, with the Melbourne and Sydney markets quickly adjusting down on the opening day.

This proved a catalyst for a loss of confidence and the market tracked lower wiping out last week’s gains and then some.

The Eastern Market Indicator (EMI) fell 97 cents or 6% (after lifting 67 cents or 4.2% last week), to close at 1,511 cents. The Au$ also eased fell slightly to US $0.672. This saw the EMI in US$ give up “only” 72 cents to end the week at 1,015 cents.

Western Australia had a tough selling week, selling just 4,300 out of 7,300 bales offered, (a PI rate of 40.8%) with the Western Market Indicator dropping by 92 cents to close at 1,610 cents.

Sellers reacted to the sharp sell-off with the National Pass-in (PI) rate increasing for the week to 33.4%, up by a massive 26% on last week. Again W.A. was a major influence, with almost 50% of fleece wool not selling, for a combined W.A. Pass-in rate of 40.8%.

An increased offering of 37,021 bales came forward, with 24,600 bales cleared to the trade (Figure 2). There have been 112,839 fewer bales sold this season compared to the same period last year. This is an average weekly gap of 10,258 bales.

The decline in Australian wool delivered to the world’s processors is alarming, looking at the same periods (July to current) for 2017, 2018 & this year we see 442k bales sold in 2017, followed by 383k last year & 270k this year to date. This is roughly a 40% decline over three years in bales sold to the trade. There is little doubt that demand for wool has suffered, with a myriad of possible reasons to explain this decline.

The dollar value for the week was $42.07 million, for a combined value so far this season of $466.88 million, and a bale average value $1,707.

Trying to find any shining lights this week is difficult, with the Cardings indicators up by an average of 4 cents, however, Crossbreds types were not spared and fell by 50 to 90 cents.

The week ahead

Next week a much-reduced offering of 34,174 bales are rostered.

AWEX notes that the volatile market has left “sellers uncertain”, I think it is fair to say the exporters are also feeling the concerns. The massive movements almost on a weekly basis are unprecedented; this will be making life difficult for exporters advising and negotiating buying orders.

Swine fever forces China sheepmeat demand lift

Posted on by Caitlin Dearden

In the last month, African Swine Fever (ASF) has extended its reach to the Philippines, Korea and most disturbingly to Australian borders at Timor Leste. Additionally, official Chinese acknowledgment has surfaced regarding the scale of the impact on the Chinese pork industry. After the seasonal winter lull, sheepmeat exports from Australia to China have surged again as consumers scramble to fill a growing protein gap.

The first five months of 2019 saw significant growth in lamb consignments from Australia to China, peaking at 7,414 tonne swt in May. High prices for lamb and the winter lull in supply saw Chinese demand ease somewhat, although levels remained well above the normal seasonal range (Figure 1).

September saw a renewed surge in lamb export flows which took the monthly total to 6,141 tonnes swt. Year to date, the average monthly flow of lamb from Australia to China is trending 63% higher than the five-year average.

The jump in mutton flows from Australia to China were even more impressive over the September period, lifting 208% from the seasonal low posted for July (Figure 2). Year to date average monthly mutton exports are running 108% above the five-year average.

Combined, the flow of mutton and lamb to China this season is nearly at 100,000 tonne swt and represents 30% of our total export flows of sheepmeat this season (Figure 3). However, if we remain on current trajectories could see it reach to around 145,000 – 150,000 tonnes by the end of 2019.

What does it mean?

China has recently acknowledged that ASF has impacted their breeding herd with numbers down by around 35% this year. If their current infection and cull rate remains in place, they could see up to 200 million head of pigs taken out of their production system by the end of 2019. This would equate to a 40% loss in annual production, creating a protein deficit of up to 20 million tonne cwt.

Just for perspective, Australia’s annual production of beef is 2 million tonnes and our combined sheepmeat production is around 0.7 million tonnes, on a carcass weight basis. With no vaccine, ASF isn’t going to go away in a hurry from the Asian region. The disease will impact the global demand for protein for years to come.

For more information on ASF and the impact on the Australian agricultural environment contact us at [email protected] as we have detailed information available across multiple commodities and market sectors.

A tale of two yardings

Posted on by Caitlin Dearden

It was the best of yardings, it was the worst of yardings… well not quite (and excuse the Dickens pun), but in recent weeks we have seen cattle yarding levels diverging between the East and West coast with the differing supply levels flowing through to the respective cattle price sentiment across most cattle types this week in each state.

East coast yarding levels have been easing in recent weeks, slipping 30% since mid-September to see it back below seasonal average levels for this time in the year – Figure 1. Cattle price across the eastern states has responded in kind to the lower volumes at the sale yard with most NLRS reported categories posting price gains this week, although the magnitude of the gains wasn’t excessive.

Feeder steers were one of the better performers with the east coast indicator lifting 6¢ on the week to close at 284¢/kg lwt. Feeder steer prices lifted across all states except for Victoria where prices took a bit of a tumble, down 20¢ to close at 254¢/kg lwt.

Across in the West cattle yardings have been demonstrating the opposite trend to the eastern states with throughput up 26% since mid-September and trend at the upper boundary of what is normal for this time in the season and 21% above the average seasonal trend – Figure 2.

The higher cattle volumes in WA is putting pressure on prices there this week with declines of 5¢-40¢ noted across most reported categories, except for WA Feeder Steers. The WA Light Bull indicator easing the most to see a 39¢ decline to 215¢/kg lwt. WA Feeder Steers the standout performer with a 26¢ gain to hit 325¢/kg lwt and placing it at the highest Feeder Steer indicator across all states.

In offshore markets, the 90CL frozen cow indicator continues to surge pushing above 740¢/kg CIF and just 4¢ shy of the record high achieved during September 2015 – Figure 3. Underpinning the elevated 90CL in the US is limited imported supplies as product from NZ and Australia continue to be diverted to China to satisfy the growing protein void associated with the spread of ASF and the impact on Chinese pork production.

Next week

Strong export prices and healthy beef processor margins should continue to support cattle prices domestically into the coming weeks. Short term rainfall forecasts show falls limited to eastern coastal regions in southern Queensland, eastern NSW and southern Victoria but won’t be enough to push cattle prices higher in any significant manner. Sideways price consolidation is expected for the near term.

No time like the future

Posted on by Caitlin Dearden

The local market has risen in the last week, presenting strong prices for those who are fortunate enough to produce grain this year. In this week’s market comment, we look at ASX for 2021 and an opportunity for a Kansas-Chicago spread trade.

At a local level the ASX wheat futures market for Jan 2020 has risen by A$12 since last week. The volume traded however has declined with 17980mt versus 59200mt in the week prior. The continual poor outlook for the coming harvest is placing consumers on edge.

It is unlikely that prices will rise to the same levels as last year, as even though grain production is down the east coast is still likely to produce more than last year. On a year by year comparison the harvest contract for last year was trading at A$441 during the first week of October, this week it has traded at an average of A$365.

Whilst January 2020 has risen, so has red crop. The 2021 is now trading at A$336.50. Although this is at a discount to 2020, it is important to remember that this is a price for next harvest and although we have had a 2nd poor season, next year could (hopefully) be a good crop and this price may be a good starting point for marketing.

If we look globally the spread between Kansas and Chicago remains of interest. The Kansas contract typically trades close to or at a premium to Chicago. At present Kansas is trading at a 21% discount, since the turn of the decade Kansas has been trading at a 3% premium on average.

This may present an interesting opportunity to take out a spread trade with the view of the Kansas spread returning to more normal levels. This trade would be selling Chicago and buying Kansas for one of the forward months i.e. September 2020. Those taking this trade would only be exposed to the spread between the two commodities.

What does it mean/next week?:

In the next week the WASDE report will be released by the USDA. There have been private analysts releasing estimates for corn which are very strong. It will be interesting to see whether these are reflected in the WASDE.

Mutton back in favour

Posted on by Caitlin Dearden

October has started out pretty well for sheep and lamb markets, with lambs finding solid support and mutton back on the rise. October is traditionally a time of strengthening supply, so we might be seeing another lift in demand.

The National Mutton Indicator (NMI) rise last week wasn’t a dead cat bounce, unless it’s one that has lasted two weeks. The NMI gained a further 24¢ this week to move back to 556¢/kg cwt (Figure 1). NSW and Victoria are leading the way, at 588¢ and 598¢/kg cwt respectively, while WA is dragging the chain, at 467¢.

In lamb markets, the Eastern States Trade Lamb Indicator (ESTLI) has spent a seventh week sitting on support at 800¢ (Figure 2). This week the ESTLI closed at 803¢/kg cwt, with NSW at a premium and other states in the 740-760¢ range. Again, WA is the cheapest lamb state, at just 630¢, a significant discount to the east coast.

Traditionally sheep and lamb supply rise sharply at this time of year. After a couple of weeks interrupted with public holidays, figure 3 shows we should see at least a 10% increase in combined sheep and lamb slaughter. We’ve seen this on the five year average, and in each of the last two years.

Theory says for lamb and mutton prices to remain at current levels demand will have to strengthen, and with the commentary on the African Swine Fever ramping up, there is every chance exporters will be able to pay current prices for more stock.

Next Week.

Still no rain on the forecast, so we can expect supplies to at least follow seasonal trends, and maybe increase faster than normal. This could see prices start heading towards seasonal lows, but there is plenty of kill space to fill, and demand seems to be strong at current prices.

Weekly Wool Forwards for week ending 4th October 2019

Posted on by Caitlin Dearden

Back to hushed tones and whispers in the forwards market this week, as only two trades agreed.

One trade was dealt for 21 Micron wool and agreed at 1,680¢ for later this month. One trade was dealt for 28 Micron wool and agreed at 920¢ for November.

With the auction spot-price yoyo bouncing so frequently and significantly, it’s difficult to know at what level things will settle, though, looking over the longer term, at least some sideways movement is evident. With a slim auction market, a good picture of average agreed trading price in any MPG becomes difficult. In addition to that, the more producers open themselves to risk by not posting their price, the broader the average gap between post and settle, due to the uncertainty that comes with slim pickings.

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.