September 24, 2007

Australia's young cattle post lower prices

Despite quiet market activity from feeders and restockers, processors have purchased cattle with minimal competition with feeder steers prices to slip a further 10 cents to 14 cents per kilogramme liveweight (/kg lwt). Although bigger number of cow herds was offered, the cow indicator showed the least variation, with the national indicator only falling 3 cents to 124 cents/kg lwt.

According to the National Livestock Reporting Service (NLRS) of Meat and Livestock Australia (MLA), the number of yearling steers for 2007 has declined as the year progresses. The lowest monthly feeder activity was recorded in August with 32 percent less yearling steers bought by feedlots compared with the same period the previous year. The first few weeks of September have followed a similar trend.

Interestingly, the number of yearling steers purchased by feeders for the year to date is up 5 percent on the same period last year. This is a result of the large numbers purchased over the first couple of months of 2007.

Low demand and subdued activity, both at physical markets and from the paddock within this sector has been driven by the high cost of production, which has diminished margins. At the completion of September 20 trading, the Australian Stock Exchange (ASX) reported feed barley and milling grain at US$444 and US$447/tonne, respectively. This has been caused by global demand increases and lower supplies, due to the poor season. At the same time more global operations are focussing on ethanol crops.

The national feeder steer indicator has reflected this lower demand, as C2 medium weight yearling feeder steer prices hit their lowest level for the year to date. On Thursday trading, the indicator was 153 cents, which was 16 cents down on last week and 31 cents/kg below last year¡¯s price.

Trade cattle prices were predominantly weaker across the steer and heifer categories. National yearling supply at MLA's NLRS reported saleyards remained relatively unchanged on last week, but was down 16 percent on the same period last year. The numbers of medium weight C3 yearling steers suitable for the trade, however, were down 26 percent on last week. Competition was considerably weaker, despite the reduced trade steer supply. Feeder activity has been minimal, with 71 percent being purchased by processors.

Prices have reflected this substantially lower competition, with the benchmark Eastern Young Cattle Indicator (EYCI) shedding 19.5 cents on last week's value to 301.75 cents/kg cwt (hundredweight), the lowest point since April. The trade steer indicator also fell 12 cents on last week to 166 cents/kg.

Following the trend of other categories, grown cattle prices were cheaper on the back of reduced competition. National yardings of C muscled grown steers and heifers at MLA's NLRS reported saleyards fell 17 percent compared with last week. Despite the reduced supply, competition was considerably weaker, as the 88% bought by processors was relatively uncontested by other buyers.

Medium weight grown steers and Japan ox finished 4 to 5 cents cheaper, at 162 cents and 174 cents/kg, respectively. Queensland posted the strongest trends, as a full field of buyers was active on reduced numbers. Average prices for Japan ox were 9¢ above the national average at 184 cents/kg lwt. Certified grainfed categories met the greatest demand, and sold between 170 cents and an isolated 205.2 cents/kg lwt.