Tag: Cattle

The rain keeps coming, and there is more on the forecast, this time for areas which have missed out to date. The positive price response moved into its sixth week and is showing few signs of slowing.

The Eastern Young Cattle Indicator (EYCI) pushed above $7 this week to close yesterday at 701.75¢/kg cwt, over 250¢ higher than this time last season.  Figure 1 shows the EYCI is now just 24¢ off the all-time high set in October 2016.  And we’re not even in the traditional tight supply period.

Queensland is leading the charge, with restocker, feeder and trade steer indicators all within 15¢ of 400¢/kg lwt.  Over the hooks values for steers in Queensland are between 620 and 640¢, except for Cows which are at 526¢.  Only six weeks ago young cattle were making under 500¢.

NSW and Victoria are lagging somewhat in the price stakes, but are both on the rise.  With finished cattle supplies likely to tighten in the autumn, it is safe to expect most cattle indicators will move through 600¢ in the coming month.

Supply is back. Figure 2 shows cattle slaughter was last week down 8.5% on year earlier levels but was similar to 2018 levels. The much stronger prices that we are seeing now are a result of stronger export demand and booming restocker demand.

Early 2020 is the first time in over a year that east coast prices have been stronger than those in WA.  The Western Young Cattle Indicator (WYCI) rallied 24¢ this week but is well below the EYCI at 581¢/kg cwt.

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Next Week

Figure 3 shows the rain is expected to ease in NSW, but large parts of inland Queensland are forecast for a drenching.  Demand for young cattle isn’t going to ease, and it is not the time of year for supply to improve, so we can expect further upside for the EYCI.

Finished cattle supplies are less variable, with record numbers in feedlots, but with female slaughter tightening sharply, processors will have to maintain strong prices to compete for supply.

Earlier in the week, we covered off on sheepmeat export flows for January which showed a limited impact to trade flows on the back of the Coronavirus outbreak in China. This analysis focuses on Australian beef exports and shows that the picture for red meat export remains solid for the moment.

Catch up on the sheepmeat export flows for January here.

Total January beef export figures have opened the 2020 season strongly. Australian beef consignments recorded the highest January result on record at 79,221 tonnes swt and well outside the normal range that could be expected for January, as shown by the grey shaded 70% boundary (Figure 1). This result is 30% above the five-year average for January and bests the previous record high from January 2014 of 69,511 tonnes by 14%.

The outbreak of Coronavirus in Wuhan province leading into the Chinese Lunar New Year, caused some concern for Australian exporters exposed to China. Fears of a downturn in demand hit some markets, notably the rock lobster industry which saw export orders grind to a halt. Concern also began to spread among red meat producers that the impact of Corona would hit markets like sheepmeat and beef.

However, the strong January export flows for Australian beef exports demonstrate that the impact has been negligible so far. Indeed, the strongest growth in beef export demand for Australia’s key beef trade destinations for January came from China. As highlighted by Figure 2, Chinese demand for Aussie beef for the first month of 2020 hit a new January record of 21,026 tonnes swt. This represents a 201% lift on the five-year average for January and a solid 73% gain on the previous record high achieved in January 2019 of 12,155 tonnes swt.

Based on the strong January performance of beef flows to China the market share of China (the top destination for Australian beef) has lifted again on a percentage basis. The January flows show China represents 26.5% of the Australian beef trade, compared to 24.4% during 2019. Japan is in second place at 23.1%, down from 23.4% in 2019 (Figure 3). Bearing in mind that it is still early in the season and the tight supply of beef expected as we head further into 2020 may see flows and market share adjust accordingly.

What does it mean?

There has been some producer/subscriber query to Mecardo in recent weeks asking if the Coronavirus will impact domestic Australian cattle prices. Certainly, the January trade flows highlight that there hasn’t been any sign of disruption. However, this may come in the next few months if the situation in China deteriorates further impacting economic growth, red meat protein demand, and consumer confidence.

In our view, the only way Coronavirus would start to play a significant part in impacting beef export flows is if it creates a global economic slowdown reminiscent of the GFC or Asian debt crisis, and in this event, it would still take some time for a  global cattle price decline to flow through to Australian prices. In the short to medium term, local Australian prices are going to be dominated by the expected tight season and the improving climatic outlook which will encourage restockers.

Widespread and significant rainfall in Queensland has seen cattle markets extend their gains this week aided by a rebound in offshore beef export prices. The added buyer enthusiasm for store and younger stock has seen the Eastern Young Cattle Indicator (EYCI) return to a premium to Eastern Heavy Steers for the first time in a while.

Figure 1 highlights the rainfall for the week to 30^th January with falls as high as 300mm noted in the far north of Queensland and up to 100mm in south western Queensland. A reasonable chunk of north east NSW benefitting from 25mm to 50mm falls too.

Meat and Livestock Australia’s (MLA) handy summary of cattle market moves shows 20-40¢/kg liveweight price gains on the week for most yearling categories across the east coast. Most medium to heavier stock are lifting too, albeit to a lesser magnitude. Queensland Heavy Steers are bucking the trend somewhat with a 5¢ drop to close at 316.7¢/kg lwt. Although, at this level, they are still the highest priced finished cattle across the country reported on the summary so you could cut them some slack for the slight easing.

A comparison of the EYCI to average east coast Heavy Steer prices shows the improved seasonal conditions have seen young cattle prices return to a premium above finished stock for the first time in more than a year – Figure 2. The EYCI closing 6% higher this week to end just shy of 580¢/kg cwt, while east coast Heavy Steers topping out at 562¢/kg cwt.

It wasn’t just the rain providing support to young cattle prices this week with a resurgent 90CL frozen cow indicator proving that beef export markets in the US can add to the positive sentiment impacting cattle markets locally. The 90CL gaining 8.6% to close at 769.4¢/kg CIF – Figure 3.

Next week

The rainfall forecast for next week shows southern regions getting some reprieve from the dry that their northern counterparts have been enjoying. Large areas of central South Australia can expect 25-50mm, along with western Victoria, Tasmania and north east NSW.

With the summer rain in the south and improved offshore beef, export pricing cattle market should continue to be well supported into the coming week.

We haven’t seen an early January price rise for a few years, largely due to a lack of summer rain. This year we’ve seen store and cow markets lift in early sales as rain tightens supply and bolsters demand.

It is no secret that female cattle will be in hot demand if the rain seen over the last week continues.  Export beef prices have eased but they are still well above this time last year, and when processors have to compete with restockers, markets rally.

Figure 1 shows NSW and Queensland Cows have moved back towards November highs this week.  Cows are the star performers, gaining over 30% from the December close. Victoria is lagging behind a bit, at 408¢ this week, but they will no doubt join other states in the coming weeks.

The Eastern Young Cattle Indicator (EYCI) has also rallied strongly, gaining 13%, but importantly hitting its highest price since March 2018 (figure 2).  It is also the first time the EYCI has been higher than the five year average since early 2018.  The rain is making cattle bought at the southern weaner sales look cheap at the moment.

The 90CL Frozen Cow export beef price continued to ease this week, now sitting at 708¢/kg cwt.  It will be interesting to see of the 90CL can continue to fall, especially if cow prices keep rising and margin pressure comes on processors.

Over in the West, the Western Young Cattle Indicator (WYCI) has moved below the EYCI, a rare thing in recent years.  The wet weather in WA should see the WYCI find some support around the current 526¢/kg cwt level

Next Week:

For most of last year, we were looking at no rain for the week just gone, and none coming up.  This week the widespread rain is forecast to be repeated over the coming eight days, providing more impetus for markets.

At some stage, heavy cattle prices should start to follow young cattle, as fewer cattle make their way to processors.

“Someone told me long ago. There’s a calm before the storm. I know it’s been comin’ for some time” and it arrived this week with some excellent rainfall to many areas in need. Combined with an improved three-month outlook from the Bureau of Meteorology (BOM) it helped give cattle markets a lift for the first trading week of 2020.

Social media abounded with images of water flowing across previously parched grounds and filling dams, not to mention aiding firefighters in fire-affected areas. Falls up to 50 mm were reported in places that hadn’t seen rain for a long time, particularly through northern NSW and Western Queensland.

The good news is that it isn’t over yet, as Figure 1 highlights, there is more in store for the coming week across the eastern seaboard. Cattle markets responded well to the news with modest gains of 5¢ to 45¢/kg lwt across most cattle types throughout the eastern states.

On the MLA reported national indicator cattle categories yearling steers purchased by restockers showed the strongest gains on the week, up 22.5¢ to 265.6¢/kg lwt. Medium cow also managed a strong showing with a 21.1¢ lift to finish at 205.3¢/kg lwt. The Eastern Young Cattle Indicator (EYCI) mirroring the broader market to see a 38¢ lift over the week, closing at 515.5¢/kg cwt – Figure 2.

As we pointed out in our analysis earlier this week the 90CL manufactured beef export price to the US has eased significantly from its 2019 peak, but thankfully the weather trumped the international beef market moves. Furthermore, there is still a huge gap for the EYCI to make up should climatic conditions remain favorable for an extended period and begin to encourage restockers back into the market in a serious manner.

Next week

The mid-month BOM rainfall forecast release shows there is some hope for the first quarter of 2020 with much of the country showing a 50/50 chance of a wetter or drier than average outcome – Figure 3. I know a 50/50 chance isn’t too much to get excited by just yet, but it is the most positive long-range forecast we have seen in some time.

The BOM suggests that the two key factors that had been keeping moisture away from the continent (a positive Indian Ocean Dipole and a negative Southern Annular mode) are now breaking down, allowing an improved chance of rainfall events occurring. Certainly, the week ahead is looking promising and this should give credence to a continued revival in cattle markets in the short term.