Projecting where livestock prices will land next year is tricky business.
They will rely primarily on the weather and our export markets, both of which can be fickle.
But the overriding consensus through the industry is that cattle prices will head north in the new year, it is only a matter of how high.
Meat and Livestock Australia’s latest cattle industry projections, released this week, points to nothing but upside in price for slaughter-ready stock, thanks to Australia’s growing export markets.
And while cattle carrying less condition were likely to continue to be discounted until some drought breaking rain, a look at Western Australia where they are having a more average season shows plenty of upside opportunity if eastern regions get a decent autumn break.
“At 559c/kg carcase weight on 16 October, the Western Young Cattle Indicator sat at a 48c premium to the Eastern Young Cattle Indicator on the same day,” MLA’s market intelligence manager Scott Tolmie wrote.
The EYCI has since jumped to 535.50 cents a kilogram this week, but the significant disparity between trade steers and heavy steers remains.
As Mr Tolmie points out, trade steers were averaging a premium of 61c/kg carcase weight over heavy steers in January, and that has fallen to just 11c/kg in October.
Landmark Wangaratta’s Daniel Fischer said while everyone was aware the feeder market would “jump considerably” from where it was now if there was an early autumn break, it was still a long way away if you were feeding cattle.
“You can buy little cattle and they will look cheap in 12 months, but if you don’t have the ability to feed them and you have the possibility of running out of water – it is a very big risk,” he said.
“If you can get steers at $600 to $700 and sell them as a bullock or a heavy feeder, you will make significant money on your investment – if you can feed them.”
Mr Fischer said the market was reliant on Queensland getting a good monsoon season in the meantime, and driving demand.
He said at Wodonga store sales a month ago you could buy steers for less than 200c/kg, and heifers at 100-140c/kg.
“Then there was rain in the north, and at the last market you couldn’t touch a steer under 300c/kg or a heifer under 250c/kg – it didn’t rain grass, it rained confidence,” he said.
Finding cattle to fill northern orders would be a struggle however, Mr Fischer said, with many of his clients in northern Victoria leaving paddocks empty until autumn when they would be guaranteed grass.
The national over-the-hooks indicators rose between 2 and 7 per cent for July through to September, MLA reports.
And with numbers on feed expected to have dropped in the past quarter, Rabobank senior protein analyst Angus Gidley-Baird said the gap between fat and store cattle would remain close.
“Feedlotters were expecting numbers on feed to drop which will reduce the flow of fed cattle going through the system, keeping the heavy cattle price firm,” he said.
“We don’t really have any surplus of young cattle either. The big weaner sales go from end-of-the-year through first quarter of next year, until we get to that point, there is not going to be a lot of movement in that price.”
Prices would likely remain where they were until the northern wet season was assured, Mr Gidley-Baird said, with the recent uptick more to do with producers holding numbers back from market rather than a big wave of restocking demand.
“We are far enough into spring there won’t be much movement now until we get to autumn rain for southern guys,” he said.
Mr Gidley-Baird said the female slaughter percentage this year would indicate we were eating into the breeding herd, which could offset downward pressure on young cattle prices going forward, as less would be produced.
“You’ll have compound effect of limited supply of heavy cattle, which won’t be able to fix itself for 12 months…which will mean any backgrounder and feeder will be competing for young stuff as well,” he said.
“However producers might not burn through as much cash trying to restock as they did back in 2016 given the season – people might be more conservative with their approach.”