Victorian weaner cattle sales set to face market correction

Rising agricultural input prices for farmers, narrowing profit margins for processors and feedlots and unusually wet seasonal conditions are all to blame for the tumble in red meat prices from year-ago levels.

Industry analysts have forecast a significant correction in weaner cattle prices as large selling centres - including Wodonga, Wangaratta, Hamilton, Casterton, Mortlake, Yea, Pakenham and Ballarat - prepare for thousands of cattle to pass through the respective saleyards in a number of weeks.

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A 50 per cent increase in diesel, soaring labour and chemical costs, rising interest rates and shrinking financial margins are likely to affect buyer confidence.

Meat & Livestock Australia senior market analyst Ripley Atkinson said an oversupply of cattle would also contribute to a softening of prices.

It follows the largest monthly yarding in two years in Australia after 226,000 cattle were sold nationally in November.

"Victoria has had really three or four really good joining periods with high branding rates and that's delivered a larger calf drop along with more breeding females in the herd," Mr Atkinson said.

"Restocker yearling steers are back 185 cents a kilogram year-on-year and restocker yearling heifers, similar articles to what you expect to be sold in these sales, are back 215c/kg."

"However, even with the marketing softening across both categories, when you look at the current prices offered for young cattle, they are still well above the five and 10-year averages.

Veteran north-east Victorian livestock agent and Corcoran Parker director Kevin Corcoran said more than 20,000 weaner cattle would be sold across Wodonga and Wangaratta between January 3 and 6.

"There are extra numbers and that's principally because of the good seasons and the pregnancy ratios in their herds has vastly improved," he said.

"Last year a big percentage of farmers retained their heifers, whereas this year because there's adequate numbers of breeders, farmers are letting go more female cattle.

"In some cases, breeders are selling their heifer drop."

The north-east sales will start with the Ray White Rural Albury 1400-head weaner sale at the NVLX on January 3.

Mr Corcoran said the additional supply of cattle would be one contributor for the softened beef prices.

Agricultural analyst and Episode 3 director Matt Dalgleish said the industry would not likely experience the extreme heights of beef prices noted last year, but maintained prices were still buoyant when compared to history records.

"When you look at it historically, it's still good pricing for weaner cattle when you look back over the last five or 10 years," he said.

"Producers are aware that the strength we've seen over the last few years can't last forever and at some stage we were going to see a correction.

"That's due to a range of factors such as inflationary concerns, cost of fuel, interest rate increases, fertiliser costs remaining high and other costs to farmers such as labour which are all expensive."

An analysis by Episode 3 shows on average cattle prices, from heavy steers through to young cattle, have declined by 15-20pc on average compared to the same time last year.

"Through the latter part of this year, the final quarter, there was quite a bit of margin pressure on feedlots," Mr Dalgleish said.

"We know that processors have been under margin pressure for at least the last year, so you have two significant sections of the market effectively that have faced that pressure.

"Having those sections of the market under pressure is not a good long-term prospect for the industry."

Hamilton and District Stock Agents Association president Bernie Grant, LMB Livestock and Land, said conditions in the western half of the state had improved in recent weeks.

"We've started to dry out now which is good because we were horribly wet between September, October and November so feed-wise we're in a good position at the moment," he said.

"People might have excess feed and because prices have retracted, that will give local buyers an opportunity to step up.

"We also expect Gippslanders to be active at the sale, along with buyers from the south-east of South Australia and we're also hearing of a few northern orders pending."

Mr Grant said supply and demand of cattle across eastern Australia would determine the strength of sales.

"Farmers realise that this year was one out of the box price-wise, but everybody is a realist and people are coming to terms with where it is going to be," he said.

"I'd expect the weights of the cattle to be very similar to last year and every year the average weight across the yarding is within a few kilos of each other."

South-west Victorian feedlotter Alistair Nelson, Colac, said he expected prices for weaner cattle to be similar to what saleyards had reported across Victoria in the last three months.

"I think the market has bottomed and I can't see it getting a lot cheaper," he said.

"We're yet to understand how the floods in NSW will affect backgrounders and weaner buyers in the north, but ... there will still be demand from those buyers."