Producers moved quick on El Nino, so worst of price pain likely over

Leading Australian analyst Matt Dalgleish, Episode 3, says there is good argument that the majority of the correction has already occurred and the market would kick along at the current level into next year rather than continue to plummet.

"Assuming the drought is not too severe or too long, we probably have a couple of years of slightly softer pricing on an annual average basis but the worst has now passed," he told a webinar organised by the Roundtable group of independent agents last night.

"As we move beyond 2025, some of the dynamic of what's happening in the United States in terms of their cattle shortage will mean they will have a voracious appetite for our beef and that will underpin a recovery for our pricing.

"Cattle markets cycle. We are in the down cycle now but there are positives ahead, in both the next few years and certainly the next few decades."

One element backing that theory was a comparison of the inflation-adjusted, or real, price for both young cattle and heavy steers over the past 50 years.

Episode 3 looked at that price for a 300 kilogram live weight animal in dollars-per-head. The long-term average price is around $900 and the 70 per cent range is $650 to $1250.

"So where we sit now is below average but still within the 70pc range," Mr Dalgleish said.

"That's consistent with the view Australian cattle are currently undervalued."

Extreme pricing - when the EYCI goes outside the 95pc range - would be either above $1565 per head or below $305 for that article.

For the heavy steer, the correction has not been as big as what occurred in the 1970s.

The Episode 3 data shows the 50-year average for the national heavy steer comes in at around $1600 per head, based on a 550kg live weight animal.

The normal range is between $1100 and $2100, so once again this category is below average but within normal.

Agents believe one of the reasons the cattle market dropped so hard, so quickly was that producers moved early - well before conditions turned dry in some cases - to get in the position of 'core stock only'.

They were conscious of being well stocked after three good seasons.

Queensland calf producers Jack and Emma Groat, Lorraine, north of Roma, agree.

"By mid April, we know the feed we've got is all we will have until early the following year," Mr Groat said.

"It was very obvious this year we wouldn't have the same amount of feed as normal so we started selling straight away.

"By the first week of May, everything was gone when we'd normally be just starting to sell.

"We wanted to bring numbers down to just the core breeding herd early."

Mr Groat said there did not seem to be much appetite to feed through drought.

"Memories are recent, and raw, of how much trouble you get into if you hang on too late," he said.

The Groats, who run Droughtmaster and South Devon cross breeders, were also proactive in securing the supplements they'd need, and say most other producers they know were too.

"Everyone realised what we were going into and made sure they were in programs," he said.

"We ordered hay and cottonseed way back before winter and we've had the lick blocks, and now molasses-based supplements, we need."

He said his cattle were going reasonably well with lesser quality feed.

"But at the end of the day, we need the grass to go with the supplements - that's the most frightening part of us," he said.

"It's a pressure cooker situation right now - the lack of rain and lack of feed, supplements running out and going up in price and cattle prices through the floor.

"We really need some people to start getting rain so there is somewhere for cattle to go and people can offload when they need to."