Early summer rain won’t help many of the producers who are preparing calves for the annual southern weaner sales in the New Year.
A flat spring across much of Victoria and southern NSW means weaned calves are being predominantly supplementary fed to get them to sale weights, with the exception being South-West Victoria and South-East South Australia.
It could, however, still have some influence on northern buying demand, a crucial market for sales right across the state, from Hamilton to Wodonga.
January 2018 prices sat at the 330 cents a kilogram mark for medium weight steers, which was a substantial dip from 2017’s record highs of 400c/kg and above for some categories.
However 2018 prices, where the opening week of Wodonga offerings averaged 328c/kg (for 320-400kg steers), and Hamilton’s first sales averaged 326c/kg (for an average 356kg weight), were said by many to be more sustainable for both sides of the fence.
The dry had already been biting hard in parts of the country in January this year, which diminished slightly the northern restocker demand, and seasonally things have got worse not better in many regions since then.
Rabobank predicted in its latest quarterly beef update that high slaughter numbers, and much of the rainfall being too little and coming too late to help keep finished cattle prices relatively firm.
Meat & Livestock Australia (MLA) records show the heavy steer saleyard indicator, which covers 500-600kg beasts, averaged 297.17c/kg liveweight in November, its highest monthly average since April 2017.
But Rabobank animal protein senior analyst Angus Gidley-Baird said in his report the price for younger cattle will continue to be “heavily dictated by the season”.
“Although prices for cattle are currently at sustainable levels, young cattle will be exposed to some downside pressures over the coming months if seasons do not improve,” Mr Gidley-Baird said.
“A drier than average outlook for the next three months, together with the onset of southern weaner sales in January, may cause young cattle prices to ease further.
“The Eastern Young Cattle Indicator (EYCI) jumped to 541c/kg in late October – the highest it had been in seven months.
“It subsequently fell back to 518c/kg on November 8.”
According to MLA, the EYCI averaged 523.15c/kg in November, which was its highest monthly average since March, but was also more than 50c/kg below the November 2017 average.
Mr Gidley-Baird said working out whether it will rain or not was going to be the critical factor for southern weaner sales early in the New Year.
“Because it has been so dry up to now, we really need to have a very kind summer for people to have any confidence to restock,” he said.
“With Victorian cattle prices, there seems to be a bit of an uptick in the 350kg weight range when it rains, but the lighter cattle are less responsive – buyers may not be willing to go in and buy in young cattle to hold for a long time, but are okay with the heavier stuff with the view of trading them not too far in the future if need be.
“From a weaner sale point of view, it will be dependent on how the summer pans out – it is at the mercy of the season – but the feeders steers at the 350-400kg range are still doing quite well, we haven’t had a lot of those cattle coming into the system so there is large demand for those to go through into the feedlots.”
While a number of calves have been turned off early, and a good wet season in the north could suck more cattle from the system, prices are unlikely to have much upside from current rates, Mr Gidley-Baird said.
“There is still limited numbers of stock around, and judging by the number of cows sold this year, you would expect the calf drop for next year to be down, so not as if a whole lot on the market and if there is rain might see the price hold firm,” he said.
“But I don’t expect to see a huge jump even if it does rain in the north people will still be cautious before undertaking any real restocking.”
Mercado analyst Matt Dalgleish agreed the biggest impact on buyer demand in the New Year would be the rainfall outlook, which had changed significantly in the most recent forecast.
“The Bureau of Meteorology has been saying we were going to see an El Nino event late this season and early 2019, and that is what has been leading up to latest forecast, but now the forecast is looking good for December,” Mr Dalgleish said.
He said a lack of clarity around what was expected in terms of autumn rainfall would be weighing on the minds of buyers looking to put cattle onto pastures.
“If you are sure you could revert back to a normal season with a relatively average autumn break in the south, that would encourage people to restock and have an impact on prices,” he said.
When it comes to the crucial northern support, Mr Dalgleish said although the rain forecast wasn’t looking too bad for Victoria and southern NSW, it was pointing to a delayed start to the northern wet season.
“And if you look at the rainfall prediction for the next three month period into northern states, they are expecting that above the northern NSW border only a 40 per cent chance of exceeding median rainfall,” he said.
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