Cattle market uptick, but how long can it last?

Cattle market uptick, but how long can it last?


Beef
The action at Blackall in central west Queensland last week.

The action at Blackall in central west Queensland last week.

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EYCI shoots up again but experts say it's not sustainable.

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RESTOCKERS are yet again flexing their muscle at the saleyard, driving the young cattle market north on the back of the deluge across big breeding and growing regions of Eastern Queensland and Northern NSW.

Those prominent beef regions are now looking at a Bureau of Meteorology three-month average outlook, which seems to have pumped a good deal of confidence into the game.

Meat and Livestock Australia market analysts say the rain across large swathes of the East Coast during March and the first part of this month is now likely to carry market momentum well into May – the time of year when prices seasonally decline.

MLA market information manager Ben Thomas said the expected cattle slaughter drop this month would be exacerbated by temporary processing plant closures due to storm damage and the public holidays.

That may put a slight dampener on processor buying but it was expected that would turnaround quickly.

“A bit of confidence has returned to some aspects of the processing sector following disruptions to the Brazilian China beef trade,” he said.

“That has come at a time when generally speaking the global beef market is much softer than it had been in 2015/14.

“Up until three weeks ago, the Eastern Young Cattle Indicator (EYCI) had been on a general five-month decline. The turnaround has been all restockers.”

The question on everyone’s mind, naturally, is how long can restockers keep the market at these unprecedented highs.

National Australia Bank agribusiness economist Phin Ziebell said it was a big call for prices stay at this level for an extended time.

National Australia Bank agribusiness economist Phin Ziebell gives an outline of how markets are travelling at a trade and export forum in Darwin last week.

National Australia Bank agribusiness economist Phin Ziebell gives an outline of how markets are travelling at a trade and export forum in Darwin last week.

Speaking at a NAB export and trade forum in Darwin, he said the latest rain may have provided an uptick but if it dries out, plenty of signs were pointing to prices coming off.

While the Australian cattle herd was indeed very depleted, the problem was prices now are at such a high point in combination with very uncertain prospects in terms of them staying there.

“The ability to restock in this market, four years down the track from when people had to destock, is questionable,” he said.

“That’s why so many in Western Queensland are talking about going back into sheep.

“There may be a bit of substitution, although the same question marks are hanging over that market.”

Mr Ziebell said an EYCI level of 500 cents per kilogram carcase weight by end of the year was the number his team were putting into spreadsheets at the moment.

“If we get back to El Nino, prices could come up but longer term we’ll see that the run we’ve had in last two to three years has primarily been about a very unique set of circumstances which would be hard to repeat,” he said.

“The real question in the back of my mind is South America and how well they will be able to capitalise.

“It’s an ultra competitive market.”

The story Cattle market uptick, but how long can it last? first appeared on Farm Online.

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