October 8, 2007

Mixed price trends for Australian cattle

A weeklong public holiday disrupted cattle price trends in Australia last week. According to the National Livestock Reporting Service (NLRS) of the Meat and Livestock Australia (MLA), the national indicator for yearling steers gained 1 cent to average 163 cents per kilogramme liveweight (kg/lwt), while feeder steers lost a further 6 cents to settle at 149 cents/kg lwt. Export categories faired better, with medium steers firm and Japan ox 1 cent cheaper, at 157 cents and 169 cents, respectively, while cows gained 5 cents to average 123 cents/kg lwt.

Cattle slaughter across the eastern states during September 2007 remained relatively unchanged at 526,244 head - a 1 percent fall on the same month last year, and on the five-year average for September.

There was a mixed trend across the eastern states, with slaughter fluctuating between 5 percent below and 6 percent above September 2006, mirroring the five-year average. Victoria and New South Wales recorded increases of 6 percent and 5 percent, respectively, in comparison with September 2006. This can be attributed to seasonal conditions and the inability to hold onto livestock, given dwindling pasture and water availability. Accompanying this, was the high cost of supplementary feed, which meant that more numbers appeared at physical markets and direct to works.

Queensland and South Australia slaughter, on the other hand, was 5 percent below September 2006. Several factors influence the fall; including scheduled maintenance closures and reduced kill days by several processors, along with the influence of the high A$ on margins. The main influence, however, was supply, with key cattle producing areas in northern Queensland operating under reasonable conditions for this time of the year.

The benchmark Eastern Young Cattle Indicator (EYCI) at the completion of Thursday's sales was 286.25 cents/kg cwt (hundredweight), which was down 5.7 cents /kg cwt on last week and 11 percent lower than the same time last year. This was also the lowest point for the EYCI since January 2007.

Overall, indicators have all been on the downward trend for young cattle categories for the past three months, not just the eastern states. The national vealer and trade yearling steer indicators lost 17 percent, while feeder steers dropped 15 percent since July. During the same period, the EYCI has fallen 15 percent.

The main factors influencing prices include the deteriorating seasonal conditions, the record global and domestic grain prices which have hampered feeder activity and the high A$ which has squeezed processor margins - leading to weakening competition.

At the end of Thursday's markets, national indicators for vealer and yearling steers averaged 162 cents and 163 cents to be down 1 cent and up 1 cent/kg, respectively. The feeder steer category followed a similar cheaper trend, to be down 6 cents to 149 cents/kg.

The supply of medium and heavyweight grown steers at MLA's NLRS reported saleyards fell 34% on the same shortened week last year. Despite this, demand from processors was subdued - influenced by the strengthening A$. At the completion of Thursday's markets, the medium steer and Japan ox national indicators were both down 1¢ on last week at 157¢ and 169¢/kg lwt, respectively.

The supply of D2, D3 and D4 medium cows on the other hand increased 10 percent on the same short trading week of last year. Beef cow competition has been assisted by the disrupted trading week, as processors were active on the medium weights to fill kill sheets. The national indicator for US cows increased 5 cents on last week, to 123 cents/kg.