Money drawing southern cattle out

Money drawing southern cattle out

Sales
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The sheer number of cows coming forward has surprised southern agents.

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RAIN normally shortens up supply but the large regional market of Wagga in southern NSW seems to be defying the orthodox with more than 6000 head again on Monday after a similar number last week.

While feeder-weight yearling steers and heifers were reasonably represented, it is the sheer number of cows coming forward that has surprised local agents.

Last week there were 1700 and this Monday another 2000, mostly very good heavy descriptions.

Riverina livestock agent James Tierney thought there might be a combination of factors influencing this current run of cows.

For those who have elected to take the money, they were not disappointed this week with the heavier feeder steers 12 to 19 cents a kilogram dearer at around a 360c/kg average and sales to 395c/kg. Lighter weaner steers topped at 465c/kg.

Firstly the season in the southernmost third of the state has not been as good as the northern two thirds in terms of quantity and distribution of rain. So much so that a bit of hot weather could quickly burn off what response there has been.

There is some preg testing and culling happening but above all, it seems to be money that is drawing the cattle out.

Historically after a reasonable spring, weekly yardings of around 2500-3000 head could be expected at this time of year.

Considering the weight of numbers sold last year there has probably been a tendency to expect herd numbers on the low side and as a consequence, no one was really expecting yardings of this size.

MONEY TALKS: There is some preg testing and culling happening but above all, it seems to be money that is drawing the cattle out.

MONEY TALKS: There is some preg testing and culling happening but above all, it seems to be money that is drawing the cattle out.

For those who have elected to take the money, they were not disappointed this week with the heavier feeder steers 12 to 19 cents a kilogram dearer at around a 360c/kg average and sales to 395c/kg. Lighter weaner steers topped at 465c/kg.

Northern buyers drove the cow market up by 14 to 18c/kg bringing the average for the big sample of over 1100 heavyweights to 291c/kg.

US market weaker

FOR those paying big money for store cows as a turnover proposition, the unwelcome news this week is a further drop in the US market for imported lean beef.

90CL blended cow (Aust/NZ Lean, FOB US East Coast) dropped from $US235/cwt (week ending February 7) to $US227 last week.

Steiner Consulting reports this 8c/lb drop is largely influenced by the fall in US domestic 90CL boneless beef prices which have come under pressure as a result higher cow slaughter rates in the early weeks of this year.

But as much a contributor to the present picture is the uncertainty about demand from China in March and April.

At present buying activity from China is reported to be very subdued and there is no indication of when Chinese buyers will return to the market.

Various media sources suggest cold chain distribution infrastructure is overwhelmed with product as a consequence of government transportation curbs and other restrictions that have affected business operation.

However Steiner's advice is that many Chinese ports are slowly resuming operations but it remains unclear when they will return to full capacity.

Part of the uncertainty stems from the fact that Hubei province, the epicentre of the coronavirus outbreak, is imposing even more stringent restrictions on transportation and business operation while other parts of China are moving to ease such restraints and encouraging return to work.

With Hubei accounting for 80 per cent of the 70,000 confirmed cases and 95pc of China's 1770 deaths, it is apparent that the intent is to contain the problem within Hubei while at the same time getting economic activity back on track in the rest of the country.

If ring-fencing Hubei does succeed in containing the outbreak, it may well be that the rest of the country can get back to some degree of normality fairly quickly.

Given that it was uncertainty about beef demand that drove down US fed and feeder cattle futures which in turn affected calf prices and contributed to the liquidation of beef cows, a shift in fed-cattle outlook led by recovery in export demand could quickly reverse the cow slaughter trend.

With less cow beef in the offering, US domestic lean prices might be expected to recover and exert some upward influence on imported lean prices.

Little wonder then as Steiner has observed that overseas traders are somewhat reluctant at the moment in going too far out front with their offerings.

Wait and see for market forces to play out

IT was always going to be the case that once it rained and supply tightened, processors would reach a point where it becomes cheaper to drop time than continue to tear money up on expensive cattle.

One major operator I spoke to earlier this week said the list of items now trading in the red was growing by the week.

With Queensland grid rates now at 640c/kg for 4-tooth ox and 550-560c for heavy cow there is no indication that more money will bring out any more cattle in the central and northern parts of eastern Australia than the current day-to-day numbers.

This situation is not helped by the eight-day weather forecast which suggests it may be a little while yet before people can see their way clear for stock movements to resume.

Accordingly we may now be at the point where processors adopt a more conservative approach while the cattle supply picture and uncertainty that is impacting the meat market play out.

One certainty is that the current disconnect between cattle prices and the meat market is the biggest seen in a very long time.

While the meteoric rise in cattle prices has been very public, the concurrent fall in the meat market has been less obvious and it is the latter that is creating considerable anxiety for processors.

Resumption of Chinese buying activity is one thing but in the meantime there is particular concern about the impact of cancelled China volumes on Japan, Korea and US prices.

Being forced into the position of price taker because of the alternative cost of repackaging or breaking Chinese bagged product up for the domestic market is not a good place to be.

For now it is wait and see.

The story Money drawing southern cattle out first appeared on Farm Online.

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