By Matt Dalgleish | Source: MLA, ACA
The vast amount of saleyard data the forms market indexes like the Eastern Young Cattle Indicator (EYCI) can be filtered and analysed in many different ways. It can be adjusted to reflect particular regions or saleyards, cattle types, buyer types, weight ranges and a host of other characteristics or a combination of characteristics. Recent North Queensland percentile analysis prompted a few NSW premium subscribers to ask us to delve into the underlying NSW saleyard data to highlight comparative movements of different filtered cattle types to the EYCI.
We filtered the underlying EYCI data into two data series - an index of EYCI style cattle at the Forbes, Wagga and Carcoar (CTLX) saleyards and an index of feeder cattle between the weight ranges of 450-500kg lwt from the Tamworth and Inverell saleyards. Figure 1 shows the two filtered indexes against the broader national EYCI price movements since 2014 and shows how the regional, cattle type and buyer type differences can vary from the EYCI at different times of the season.
Using the filtered data that forms the two price indexes we can take a look at the seasonal percentage spread relationship between these filtered indexes and the broader EYCI to see what type of impact the season can have on the spread and how much the spread has varied, based on the historic data. Figure 2 shows that percentage spread pattern of the EYCI to the Forbes, Wagga and CTLX (FWC) index, overlaid with the ten-year average spread pattern and the 70% - 95% ranges in spread variation (in other words where the spread has fluctuated for 70% and 95% of the time during each year since 2006).
We can see that the early and later parts of each season are characterised by the EYCI trading at a slight premium to the FWC index of around 2% on average. In contrast, the months during April to October tend to see the EYCI trading at a discount to the FWC index, culminating in an average low of around 4% discount during Winter. The 95% range area shows that for most of the time during the season the spread doesn’t tend to go beyond a 5% premium and a 9% discount.
Figure 3 shows the same type of spread chart for the Tamworth/Inverell 450-500 kg lwt feeder cattle index compared to the EYCI which is characterized by a much wider potential range to the spread (indicative of higher volatility in this series) and an average pattern that shows the EYCI usually runs at a premium between 0-5% to this classification of cattle for most of the season, somewhat unsurprising given the filter parameters.
The ability to filter the underlying EYCI data is a powerful way to drill down into a specific section of the broader cattle market to determine seasonal variations within a particular section of the market or to get a better understanding of the supply/demand situation of a region, cattle type or buying group and what this may mean for the broader market movement.
MLA recently updated their market reports and prices section of their website to enable users to undertake some basic filtering of sale yard data. However, for those wanting to complete a more detailed combination filtering and analysis of the underlying data the team at Mecardo is here to assist.
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