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Thursday, July 02, 2015

Cattle outperform lambs in SA

By Augusto Semmelroth  |  Source: MLA's NLRS

Despite the relatively poor seasonal winter conditions and ongoing strong cattle turnoff, SA cattle markets have surged since April. This is in line with the performance of NSW and Victorian markets, with prices surging 30-40% during the period into unprecedented territory. Lamb and mutton markets, on the other hand, continue to lag behind their eastern states counterparts.

Key points:

  • As with NSW and Victoria, South Australian cattle markets have surged over the last three months with steers gaining 130-150¢ during the period.
  • Given this remarkable recovery started from a high base, price records were consistently broken along the way as markets continued to trend higher.
  • As of last week, all SA cattle indicators were quoted at their 100th percentile as recent rainfall assisted further gains.
  • While percentiles are a great analytical tool to assess the long-term performance of markets, they fail to reflect short-term movements when prices continue to break new records to push the 100th percentile higher and higher.
  • In other words, the 100th percentile of last week is already more than 100-120¢ above the 100th percentile in early May for most cattle categories in SA.
  • Another way of assessing how strongly markets have moved in recent months is to measure the price gap between the 90th and 100th percentile. As of last week, this gap was in the order of 150-170¢ for trade and medium steers.
  • To put this gap into perspective, a trade steer of 250kg cwt sold at the 90th percentile equates to $955/head. At current price levels, they would fetch $1367/head. That’s a $412 difference (43% premium) over a steer sold at the 90th percentile.
  • Overall, SA markets are tracking Victorian and NSW, but should have more upside if seasonal conditions improve and cattle slaughter eases in the next couple of months.
  • On the lamb and mutton front, prices stabilised in June after a solid recovery in April/May. Last week, however, prices moved another leg higher to narrow the discount gap to other eastern states.
  • That said, trade lambs remain 50-60¢ below Victorian and NSW prices at the saleyard level. These discounts are absent for OTH prices, for which lambs are quoted around the 600¢/kg cwt mark.
  • SA saleyard prices are expected to move back in line with Victoria and SA, should seasonal conditions improve to see turnoff dwindling more substantially in the coming weeks. 
  • In percentile terms, SA lambs are tracking around the 92-97th percentile levels, compared to the 98-99th level in NSW/VIC. 

Read more about how to interpret percentiles

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