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Thursday, March 06, 2014

How are young cattle markets faring in the east? – monthly percentiles

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

Key points

  • Breaking the EYCI data down helps to understand the varied dynamics of young cattle markets across the east coast.
  • Northern markets continue to underperform their southern counterparts despite recent rainfall events.
  • Restocker demand is yet to improve to lift young cattle prices in the north.
  • Lower prices paid by northern processors reflect the ongoing large number of poor conditioned stock flowing onto saleyards. 

Young cattle prices remain at depressed levels across the east coast. They do, however, vary considerably between regions and depending on who is buying them. Breaking down the EYCI data shows that southern markets are faring better than their northern counterparts, while lot feeders outperform other buyers in NSW and Queensland.

The Eastern Young Cattle Indicator (EYCI) is a benchmark for young cattle prices, namely store and finished steers and heifers, on the east coast. As such, regional prices can easily deviate from the benchmark as a result of variable seasonal conditions and the type of animals yarded in different areas.

With that in mind, breaking down the EYCI is a very interesting exercise as it helps to understand the changing dynamics of cattle markets across the east coast. Figure 1 shows the EYCI data and percentile levels for individual saleyards in Victoria, NSW and Queensland. Figure 2 shows a similar split, but by buyer type and state.

The contrast between Victorian and northern markets is evident, particularly in percentile terms. While Victorian saleyard prices are around the 20th to 45th percentile levels, NSW and Queensland are only reaching a maximum of 22-23rd levels. In the drought-stricken areas of southern Queensland such as Dalby, prices remain below 300¢/kg cwt, and are at their 6th percentile rank.

Moving the analysis to buyer types, a considerable dichotomy between prices also appears. While in Victoria processors are paying more than lot feeders and restockers for young cattle, in the north the opposite is taking place. Furthermore, the average price paid for restocker cattle in Queensland is only 294¢/kg cwt, which equates to its 2nd percentile level.

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?

There are three key obvious messages deriving from this analysis. Firstly, seasonal conditions continue to impact northern and southern markets differently, with the latter faring much better in absolute price term and percentile levels.

Secondly, the expected recovery of restocker confidence is yet to occur as the average price of EYCI cattle purchased by restockers in NSW and Queensland is still very depressed by historical standards (percentiles). Lastly, the lower prices paid by northern processors reflect the ongoing large number of poor conditioned stock flowing onto saleyards.

Store cattle markets have a greater upside potential in the advent of average to above average rainfall conditions between now and April. 

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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