Tag: Cattle

Forecast rain in the South-East corner of near biblical proportions for the week ahead keeps restocker interest high at the saleyard and young cattle prices across the country firm slightly in response.

Figure 1 highlights the anticipated rain event, with falls noted into the 200-300 mm level in Northern Victoria and falls of at least 50mm to much of Victoria and NSW. While its not great for many out there trying to complete this season’s harvest it’s a boost to backgrounders, with the high moisture and warm weather giving a lift to pasture growth in the coming weeks.

Indeed, spirits of restockers across the east coast have been encouraged and this has played out in restockers continuing to pay above average premiums at the saleyard for young cattle. The East coast restocker spread pattern showing that they are happy to pay over 6% more than the headline EYCI to secure stock – figure 2.

In an analysis piece released on Mecardo last month the main driver for the increased restocker spread was coming from Northern restockers. However, in recent weeks the Southern restocker premium has lifted too with premiums over the EYCI of 4-5% noted during November being paid, reflecting the growing optimism for a good Summer grazing potential as we head toward the end of the year.

The EYCI finished the week up 2.5¢ to 579.75¢ and the Western Young Cattle Indicator (WYCI) was also higher, lifting 13¢ to 585¢. This was despite the 90CL Frozen Cow easing slightly to close at 609¢/kg CIF – figure 3.

The week ahead

Its hard to see young cattle prices ease into the coming week with the amount of moisture that is forecast. Producers know its going to translate into decent pasture and they hate seeing grass going uneaten when they know cattle could be getting fat on it.

Make sure you stay safe out there this weekend and remember – don’t drive through flood waters. Oh, and spare a thought for the frantic lot trying to get as much harvested before the deluge.

According the Australian Livestock Exporters Council (ALEC) it was agreed last week that China are going to cut the 10% tariff on live feeder and slaughter sheep and cattle imports by January 2019. Is this a big deal, or not?

Breeding cattle dominate the Australian live export trade with China. Last year Australia had its second biggest year on record for breeder cattle exports, with 94,341 head shipping out (figure 1). There has been no tariff on breeder cattle exports for some time.

The latest announcement refers to the cutting of the tariff on slaughter and feeder cattle. This is a market which has only just started to move. For the year to October, feeder and slaughter cattle exports to China have totalled just 1,195 head. This is 2.3% of total export to China.

The abolishment of the 10% tariff on feeder and slaughter cattle exports to China will make cattle 10% cheaper for Chinese importers, while Australian sellers will receive the same price. In reality, when tariffs are removed (or applied), the benefit is split between seller and buyer, so there should be some price rise at the exporter end as well, which will no doubt benefit growers.

So where will these cattle come from?  There is competition for China in the feeder and slaughter cattle market. The main player is obviously Indonesia, while Vietnam has grown in the last five years to be easily the second largest importer of Australian live cattle.

Figure 2 shows just how large the Indonesian and Vietnam markets are compared to China. As such it would take a very large push to see Chinese live export demand start to impact prices in Indonesia and Vietnam.

The feeder and slaughter cattle which have been exported to China were actually sent out of Portland earlier this year. This is where many of the breeder cattle which are sent to China come from, and increasing live exports could add support to feeder and slaughter cattle prices in the south when a boat is going.

The 10% tariff was also lifted on sheep, but sheep exports to China don’t even rate a mention in the data.  They are lumped in with ‘other’.

Key points:

• China have lifted the 10% tariff on live feeder and slaughter cattle and sheep imports from Australia.
• The current trade with China in live feeders and slaughter cattle is very small, but could grow with opening of the trade.
• Over time increasing demand for beef in China is likely to see the market grow and support prices.

What does this mean?

The lifting of the tariff from China is not going to see a rapid jump in prices tomorrow. It is an indication, however, that China are serious about taking more live cattle from Australia to bolster beef supplies. While the market is currently very small, any opening up of trade is good for cattle producers, as boats create competition and support prices.

Figure 1 shows that breeder cattle exports have grown rapidly in some years, so don’t be surprised if you start hearing more and more about boats going to China.

Robust northern cattle prices are attracting stock to the saleyards again this week in Queensland. Although, East coast throughput is sitting at fairly average levels for this time of the season as higher than average northern states yardings are offset by below average levels in the southern states.

Figure 1 shows the steady rise in Queensland cattle yardings since mid-October and based off last week’s figures we saw another 27% gain in cattle at the saleyards this week. Queensland Restocker, Feeder, Vealer, Medium and Heavy Steers all fetching the strongest prices for their categories across the country this week, so it is probably no surprise that we are seeing producers bring forward supply in the Sunshine State.

Queensland yardings sitting 28% above the five-year average for this time of the season and the above average throughput in Queensland and NSW, which has this week’s throughput 7.5% higher than average, has been offset by lower than average throughput in Victoria and South Australia, at 46% and 40% below their respective average levels. This combination of East Coast yarding levels offsetting each other, saw broader throughput at just 3% below the five-year average for this week in the season – figure 2.

National saleyard cattle prices were relatively subdued this week, with most indicators not varying beyond a plus or minus 2% swing. The Eastern Young Cattle Indicator (EYCI) is virtually unchanged on the week at 578.5¢/kg cwt, while the softest national category was the Heavy Steer Indicator, off 2.3% to 279¢/kg lwt. National Trade Steers were the best performers, closing up 1.8% to 304¢/kg lwt.

In the West, young cattle fared a little better with a 3.6% rally to nearly match the EYCI level, to rest at 575¢/kg cwt. The benchmark beef export indicator, the 90CL frozen cow, finished the week back above 600¢ for the first time in seventeen weeks.

The week ahead

Some very good falls were noted through SA, NT and Western Victoria noted this week (figure 3) and the forecast for next week is for further rain to cover much of Queensland, NSW and Eastern Victoria with levels noted between 50-100 mm in many places.

Good coverage like this and solid export price levels will mean it’s unlikely to see cattle prices soften too much across the nations for the short term.

It has only been a week since China’s ban on a number of Australian beef exporters was lifted.  Without the ban, beef exports could be expected to surge in November, but despite weaker total exports, the trade with China has already hit a two year high in October.

We continue to bemoan the lack of weekly slaughter data, export data can be a bit of a proxy for beef production. Total beef exports for October fit nicely with the theory that cattle supply has been tighter, and pushing prices higher.

Figure 1 shows that while Australian beef exports remained very strong relative to last year in October, exports did decline relative to last month and winter figures. On average total beef exports rally in October as cattle supply improves, but rather than a 5% increase on September, we saw a 2% decline (figure 1).

Changes in beef export volumes to Japan and the US were broadly in line with the total trends. This is expected as Japan and the US accounted for 48% of total beef exports. There were a couple of big movers however.

Exports to South Korea were much lower, down 18% on September and 20% on October last year. Making up for lower exports to South Korea were surging exports to China (figure 2), which were up 37% on September and 60% on October last year. In fact, despite the ban on some processors, beef exports to China were at their highest level since December 2015.

China failed to move into third place as our export destination, but the 11,353 tonnes fell just 15 tonnes short of South Korea.

What does this mean?

Weaker cattle and beef export prices (figure 3) in September and October may have helped drive increased exports to China, as it is a price sensitive market. It will be interesting to see if November and December exports to China are as strong, with a recovery in prices likely to have been passed on to importers.

Other major export markets generally have more money than China, and with higher prices and a smaller supply, Chinese exports may subside despite the reopening of the market to the banned processors.

It is good to see demand for Australian exports is still strong, and the Chinese are seemingly poised to soak up supply when prices get cheap enough. This suggests there might be a solid floor in the market until there is a heavy increase in supply.

Most of the eastern states received rainfall this week and despite higher throughput young cattle prices continued to climb, with the benchmark Eastern Young Cattle Indicator (EYCI) closing up 1.8% to see it at 577.50¢/kg cwt this week.

The improved young cattle prices in addition to a 5.3% lift in cattle throughput along the East coast saw this week’s yarding figures back near longer term average levels at around the 48,000 head region – figure 1.

This is the highest weekly yarding figure reported in nearly two months which suggests demand is managing to keep up with the extra saleyard volumes. Indeed, since the start of October weekly East coast cattle yardings have lifted 93% and over the same time the EYCI has managed to gain around 8% – it’s amazing what a bit of rain can do.

The price jump not just limited to East coast young cattle with the WYCI lifting 7.9% on the week to see it reach 568¢/kg cwt. Eastern and Western young cattle prices beginning to converge toward the key beef export indicator with the 90CL frozen cow holding ground over the last month between 575-595¢kg CIF and currently sitting at 587.4¢ – figure 2.

The week ahead

The rainfall forecast for next week shows falls of up to 50mm across much of Eastern NSW, with lighter sprinklings across the rest of the Eastern and Western seaboard – figure 3. Anecdotal reports out of the US suggest the 90CL could see some further gains in the coming few weeks as competition between domestic demand on the back of Thanksgiving celebrations, and increased offshore buying (particularly out of Asia) make an impact.

The prospect of continued rainfall and a solid 90CL export price should continue to provide further support to cattle prices locally over the next few weeks.

More wet weather this week cut cattle yardings in Queensland, and encouraged restockers to return to the market in NSW.  At a time of year when prices generally fall, or are steady, we saw a further appreciation in the Eastern Young Cattle Indicator (EYCI), but not in all categories.

In general, the cattle market lifted this week. The EYCI continued its rally, gaining a further 13¢ to hit 565.75¢/kg cwt.  The EYCI has now rallied for a month, and gained 12%, now sitting at a 12 week high (figure 1).  The EYCI seems to be heading on a similar trajectory to 2015, although the previous prices trends have been starkly different.

EYCI yardings were a touch weaker in the week ending Wednesday, but are not really abnormal.The 14,698 head yarded this week were down 5% on last week, and 29% on the same week in 2016, and 7% below the five year average (figure 2).

The main movers in price terms which drove the EYCI, were trade steers in Queensland, which gained 18.5% to move back to 559¢/kg cwt. This is just 3¢ shy of trade steers in Victoria and NSW.

Restocker steers in NSW also made a move, likely on a combination of tighter supply and stronger demand.  NSW Restockers paid 11.5% more for the most expensive cattle in the country (according to reported indicators) at 349¢/kg cwt. To be fair Victorian restockers paid the same money.

Over in the west the WYCI continues to hover in the 520-530¢ range. While this is obviously discounted to its eastern counterpart, it’s still a great price for what is generally a strong supply period in WA.

The week ahead

After three wet weeks the rain is expect to abate in NSW and Queensland next week.  This might pick up supply a little as cattle will be able to move, but there might be restockers waiting for them. It’s hard to see prices falling over the coming weeks, but upside is reliant on restocker activity as a lot of the fat for processors and feeders has disappeared with the month long price rally.