Restockers take it back a gear
RESTOCKERS finally appear to be taking the view the run of favourable trading margins courtesy of a continually rising market has come to an end.
As backgrounders have opted to stay their hand at southern weaner sales, cattle prices have fallen abruptly from mid-December rates.
The Eastern Young Cattle Indicator (EYCI) is sitting at 562.75 cents a kilogram carcase weight, compared to 617c/kg in the week before Christmas.
Dryer-than-forecast conditions, particularly in northern NSW and Queensland, have also helped tip the scales further in favour of reduced restocker competition at saleyards.
Adding further weight are the problems for beef export competitiveness being presented by sharp gains in the Australian dollar, which has risen 3.5 cents against the United States dollar since Christmas.
Australia’s finished cattle prices were now at the upper end of the competitive range into the US, Commonwealth Bank agri analyst Tobin Gorey said.
The picture is less clear, though, compared to other exporters since they too have seen their currencies gain against the greenback, he said.
While industry predictions are for the herd rebuild to keep young cattle prices above the five-year average during 2018, for the short term that could be scorched by dry conditions and restocker hesitance, analysts say.
The big surprise across the board in southern sales has been the lack of interest from western Victorian backgrounders who have good amounts of green grass on hand.
Veteran southern cattle market attendees estimate this buyer group accounted for less than three per cent of purchases this year, compared to years where they’ve made up to 40pc.
Intestate restockers were also not there in typical numbers, although they have chipped away continually and probably taken similar volumes to last year, with cattle going mostly to Dubbo and the Northern Tablelands.
Processors and feedlots have dominated top-end buying, plus two live export orders were active.
Beef consultants say client feedback suggests that given it’s not “do or die”, with many months of potential buying time ahead of winter, a wait-and-see approach has been taken, even where there is feed to spare.
“A lot of producers are asking themselves what is the cost of carrying these weaners for the next three months and what does that look like relative to where the market might be in autumn,” said NSW’s John Francis, Holmes Sackett at Wagga Wagga.
As well, northern NSW consultant Bill Hoffman said at the back of minds of anyone in the market for weaners was the limit to what feedlots can pay, given rising grain prices and downward pressure on prices at the point of slaughter.
The biggest driver of decisions at the moment was the differential on a price-per-kilogram basis between what they will pay now and what they will sell for, he said.
“It is not a rising cattle market anymore. The need to rebuild will offset that to a degree but as people look more in depth at their long term trading position, they are more likely to sit and wait,” he said.
Mr Hoffman said some northern NSW feeder steer producers made a decision just prior to Christmas to hold cattle and utilise the feed they had to put extra weight on, targeting a heavy MSA (Meat Standards Australia) or certified grassfed market instead.