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Thursday, March 09, 2017

Cattle trading margins stacking up

By Angus Brown  |  Source: NLRS, Auctionsplus, ACA

Key points

  • Restocker cattle prices have been falling in line with the EYCI as dry weather saps confidence.
  • While finished cattle prices have fallen, export feeder values remain at the top of the range.
  • Cattle trading is looking more attractive than back in January, but costs are likely to have gone up.

2017-03-09 Cattle Fig 1

Young cattle prices have been falling consistently in saleyards for over a month now. The Eastern Young Cattle Indicator (EYCI) has lost 41¢, or 6% since mid-January. During January we thought young cattle were a bit overpriced, but we’re not sure anything has changed with the fall.

Looking deeper into the EYCI data, we find that restocker prices have indeed fallen, and not surprisingly, prices have fallen further in the north.  Dry weather, and easing finished cattle prices sees northern restockers paying 8.4% less than they were during the January peak.  In yards south of Dubbo, average restocker prices have eased 4.8% (figure 1).

When we convert last week’s EYCI restocker young cattle prices to liveweight, it gives us 347¢/kg lwt in the south, and 345¢ in the north. 

Good lines of store cattle, which aren’t generally found in EYCI yards, except at Roma, have slipped in price as well.  Steers weighing 280kgs which were making around 400¢ in January, are now fetching around 380-385¢.

The price of the finished articles, we usually use export feeders, or heavy steers have also fallen.  The East Coast Heavy Steer Indicator has lost 40¢ from January peaks, to sit at 286¢/kg lwt.  Interestingly Mediumfed Export Feeder Steer prices have fallen just 3¢ according to MLA, to sit at 347¢/kg lwt. 

As you can see in our trading table, the feeder price still sits at our best case scenario level, while Heavy Steers have fallen back to what we were ‘expecting’ in January.  We had factored in some falls in cattle prices, which made the trading margins look ordinary six weeks ago.

Using the same sell prices, the $42 being saved by buyers though the purchase of cheaper cattle goes straight to the gross margin of the trade.

What does this mean?

Cattle trading has become more attractive with the fall in restocker prices, however there are good reasons.  The dry weather has no doubt decreased demand, with fewer growers having excess feed, while lower finished cattle prices are usually enough to pull back the price restockers are prepared to pay.

The latest rainfall outlook suggests cattle prices might continue to fall, as despite easing, they are still at strong levels.  Those willing to punt on getting a good autumn break, and buying cattle now, are likely to be rewarded in the winter when prices should start to increase again.

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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