Fluffing around future price trends will have to stop.
Unless there is a miraculous change in the weather pattern and a big lift in export prices, we will have to accept reality.
While sheep and lamb prices are fairing reasonably well for now, cattle prices continue to falter. It is July, and supply over most of Victoria and the south east of South Australia are at winter levels.
Some markets are even at near-record low levels. A pattern like this in any normal year would indicate increasing prices for at least the next two months.
We saw exactly this occurring in late 2015, and early to mid 2016, so what is the problem now?
Several things come to mind. The first being a very large supply of grain fed cattle. With supermarkets getting the largest percentage of their supply from feedlots, the balance by direct sales, they take no part in the market.
Despite the national herd remaining very low, a very large supply of stock is emanating from north of Victoria, and up to Queensland.
Price resistance is the main cause with both local, and export processors having difficulty being at profitable prices.
Then, at least for exporting meat, there is the Australian Dollar. Whenever the “financial experts” say the current value should fall, it always seems to rally. Currently, it is doing just that, reaching to over 79 cents against the US Dollar last week.
To be considered too, is that most, if not all abattoirs, are not operating at full capacity. This is not likely to change anytime in the near future, unless a more favorable situation for them occurs, for both sheep and cattle.
Processors are taking many phone calls for direct prices, and if satisfied, producers are selling this way, which can be the normal trend on downward price trends.
However, it is only the middle of winter, so producers need to prepare for the future. For breeders, it will mean a reduction in prices.
For fatteners, it will mean buying back in at prices cheaper than selling rates. Slowly, an again both seep and cattle, the store market prices are dropping, but still retaining a small margin in the positive.
As the caption in the above photo shows, there is very weak competition being seen at numerous Victorian markets.
Further north, where supply is increasing rapidly, and using Dubbo market as an example, 3300 head three weeks ago, then 3990, and last week 4990 cattle, processors have many more to choose from.
A similar story can be told of northern sheep sales with Wagga Wagga, Forbes, and Dubbo, all selling in excess of 30,000 head, and up to, and over 40,000 sheep and lambs last week.
Most, if not all local processors, have buyers in these markets, and this is, in part, taking away demand from Victoria.
Therefore, our small yardings, in most of Victoria, are not going to influence higher prices over winter, like they have in the past. It is well looking like the opposite will be the case.
Unless we have monumental rain over a large area of Australia, which is most unlikely, producers need to prepare for a downturn.
It is no good looking into the crystal ball, because it has a huge crack in it. So prepare for what may come in the next few months.
