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Thursday, July 02, 2015

Rainfall pushes Victorian livestock markets higher

By Augusto Semmelroth  |  Source: MLA's NLRS

Victorian cattle markets moved in leaps and bounds in April and May before plateauing in early June. That was, however, until recent rains reignited latent demand and slowed cattle sales to see prices move another leg higher. This has pushed all cattle indicators into uncharted territory and miles ahead of their 90th percentiles. Lamb and mutton markets are also thriving as a result of recent rainfall events.

Key points:

  • The solid recovery in finished cattle prices Victoria since April has been remarkable, with most categories rallying 140-150¢/kg cwt since then.
  • As cattle markets continue to edge higher, records have been consistently broken to see the 100th percentile level distancing itself from the 90th levels.
  • In this kind of market environment, percentiles fail to depict how individual cattle categories are performing, as they remain static at the 100th levels while prices continue to creep higher.
  • Yet, the widening gap between the 90th and 100th shows how prices are deviating from their historical levels. As of last week, most finished steer categories were quoted 170-190¢/kg cwt above their 90th percentiles.
  • To put this gap into perspective, a heavy steer of 350kg cwt sold at the 90th percentile equates to $1280/head. At current price levels, they would fetch $1960/head. That’s a $679 difference, or a 53% premium, over the steer sold at the 90th percentile.
  • Store cattle continue to underperform finished cattle despite being at their 100th percentiles.
  • As a general rule, young cattle yarded in Victoria track at a 15-20¢ premium to Heavy Steers. Right now, they are still quoted 30¢ below. This shows restocker demand remains subdued while pasture availability is tight.
  • Cow markets have lagged steers in recent months but finally caught up last week with prices rallying 56¢ week-on-week to 456¢/kg cwt. Needless to say, that’s also an all-time high. 
  • Sheep and lamb markets also regained some upward momentum in the last two weeks after the widespread rains on the east coast.
  • While most lamb categories are still below their 2011 peak, they managed to move above the 2014 highs last week.
  • This puts all finished lamb indicators in Victoria around their 98th percentile. Merinos are faring comparatively better, suggesting numbers are tightening more significantly as producers aim to rebuild their flocks.
  • Despite the sharp drop in sheep turnoff compared to the corresponding period in 2013 and 2014, at the 90th percentile, mutton markets are still underperforming lambs.  

Read more about how to interpret percentiles

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