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Tuesday, March 04, 2014

Cattle recover but remain cheap relative to lambs in Victoria – monthly percentiles

By Augusto Semmelroth  |  Source: MLA's NLRS, ACU

Key points

  • Finished cross-bred lambs now around their 85-96th percentile rank, merinos still at 74th.
  • Restocker lamb prices slightly below finished lambs in percentile terms; but seemingly expensive for a buy and hold trade strategy.
  • The recent cattle price recovery puts most cattle types around the 30-35th percentile levels, medium steers at 45th.  

Finished lamb prices continue to creep higher in Victoria to reach their 85-95th percentile ranks. Mutton, on the other hand, continues to lag behind at its 65th percentile level. Cattle markets are finally showing some signs of a recovery, but remain around the bottom 30% of the 10-year price range.

Lamb markets in Victoria have rallied 25% in the last five weeks. This positive momentum has seen all lamb categories reaching their 75-96th percentile levels last week (figure 1). At the top of the range is the Victorian heavy lamb indicator, followed by trade, restocker and light lambs.

Merino lamb prices peaked on 21 February but eased 17¢ last week to 417¢/kg cwt, or their 74th percentile level. Mutton markets have outperformed lambs in February to see the Victorian mutton indicator recovering 30% during the month. However, in percentile terms, mutton still lags behind all lamb categories at its 65th percentile rank.  

Victorian cattle markets have also showed a firm recovery in the last two weeks with the best performers being medium steers, now at 325¢/kg cwt (45th percentile). Other categories have rebounded less to see prices at around their 30-35th percentile levels (figure 2). The average young cattle price in Victoria has reached a 4-month high of 323¢/kg cwt last week (33rd percentile) and is 14¢ above the EYCI. 

What are percentiles?

Percentiles (sometimes called deciles) provide one way of estimating what may happen in the future by looking at what has happened in the past. A percentile is a measure of how often, historically, prices have fallen above or below a particular price level.

However, it is important to note that percentiles are not a definitive measure of absolute price ranges.  They are just one tool in your market information toolbox, and should be considered in conjunction with the other information you use. Read more about how to interpret percentiles

What does this mean?

Trade and heavy lambs have moved from around the 50-60th percentile levels to 85-95th over the last six weeks, making them a good sell at the moment. Restocker lambs have kept up, and they seem relatively costly for the ones looking for trade opportunities.

Despite the recent price rally, mutton remains relatively cheap to lambs in percentile terms. Although the performance of mutton markets will largely depend on autumn rainfall, they seem to have more upside potential than lambs in the coming months.

Southern cattle markets continue to be affected by their northern counterparts. As a result, any potential upside to the 50th percentile level (and above) will depend on a positive wet season finish in Queensland and northern NSW.

Mecardo information is provided to assist in your marketing decisions. It contains a range of data and views on the current market. It is not intended to constitute advice for a specific purpose. Before taking any action in relation to information contained within this report, you should seek advice from a qualified professional. The information is obtained from a variety of sources and neither Mecardo nor Ag Concepts Advisory will be held liable for any loss or damage whatsoever that may arise from the use of information or for any error or mis-statement contained in this report. 

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