Meat & Livestock Australia (MLA) has issued a revised outcome for cattle prices for 2017, which may answer the eternal question: how long will cattle prices stay up?
Considering MLA never gets it wrong, some may beg to differ. However, prices will have to recede sometime into the future, and MLA’s current, revised predictions, may well come to fruition.
MLA’s prediction is that the Eastern Young Cattle Indicator (EYCI) will drop to around 550 cents per kilogram carcase weight towards the end of the year. Their analysts add that it could well fall to around 450c/kg during the earlier part of 2018.
First of all, is this all that bad? One must consider the EYCI has risen from a base of around 330c/kg back in late 2014, when prices were at their lowest.
Everyone was betting on whether the EYCI would reach 500c, then 600c, and after our strongest ever market trends, 700c/kg. Well, it certainly did that, and is currently around 638c/kg.
The past has shown that when we reach a new high, the fall bottoms out at a low price that is better than before. If this is the case this year, then it may not be too bad. However, recent comments have been that producers need the current prices in order to survive.
Processors, on the other hand, are saying current prices are not sustainable, and they will have the last say after all.
Focusing on more recent trends, and circumstances, and producers could rightly expect to see these trends to continue in the short term.
When travelling to Barnawartha, last Thursday, I saw two of Page Transport trucks heading south, from Wodonga to the wharf. Page Transport have the contract for shipping cattle over to Tasmania.
Because of the drought conditions of late 2016 and early 2017, Tasmania is short of heavier cattle for the export trade. This has seen cattle transported across Bass Strait since November 2016.
While freight into and out of Tasmania is subsidised by the Tasmanian government, it is still more costly than securing supply locally. Also of note, is the increase of competition from processors putting steers away for the winter in feedlots.
Most of these steers will be fed for 120 days, and fill export orders that will lack the usual producer-supplied cattle.
While some say the fat cattle prices are being driven by the store markets, this is true in part. Prices in recent store sales remain a long way above that of physical sales.
Taking into consideration the fact that heavy steers, and even some bullocks, are being sold in store markets, denying processors any hope of buying them, other than to grain feed, if these were sold in physical sales, it would give processors further opportunity to reduce prices.
Over the past few weeks I have travelled extensively around north eastern Victoria and Gippsland, and I can say that the season varies greatly between within the districts too.
What holds for the short term future of supply is in the lap of the weather god. While in Omeo, Sunday night, Mt Hotham had some good snow fall, and it is still February.
Supply will continue to be restricted, at least that of fat cattle. The extreme heat in central Australia will continue to see plenty of restocking cattle enter the market, but autumn-like conditions in southern districts will take up some of the slack.
