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Tuesday, May 20, 2014

When and where is the best time to sell excess cows?

By Angus Brown  |  Source: MLA's NLRS

Key points

  • Cow prices have been very volatile in the last 6 months, with the best selling method dependant on location and timing.
  • Cow prices should improve over the coming 2-3 months as supply tightens and demand export beef demand remains strong.
  • If selling now, over the hooks prices are likely to offer better value, but saleyard prices should rally over the coming weeks.

2014-05-19 When And Where To Sell Excess Cows FIG 1

2014-05-19 When And Where To Sell Excess Cows FIG 2

2014-05-19 When And Where To Sell Excess Cows FIG 3

We recently had a reader enquire as to the current opportunities in selling empty cows. Given we haven’t updated this topic for a while, today we’ve taken a look at the current cow market. Our analysis suggests there could be some value in holding on to cows for a few weeks and looking for some upside.

Volatile is one way to describe NSW and Queensland cow markets over the last six months, with saleyard prices ranging from 190 to 290¢/kg cwt as the quality and quantity of cows coming into the market has varied wildly.  To illustrate how this volatility might affect returns, 400 kg lwt cows sold a month ago in Queensland saleyards averaged $557/hd, whereas last week it was $418/hd.

Figures 1 and 2 show that over the hooks (OTH) prices are much less volatile, and interestingly generally better than saleyard prices in Queensland.  In NSW, however, sending cows to the saleyards may result in a better than OTH price, or worse, and by a far margin in some cases.

The risk averse grower in both NSW and Queensland would generally be more comfortable with over the hooks sales, but those happy to take a punt (or take cattle home if they don’t like the prices) can use saleyards, especially if the market is hot.  Obviously, quality and freight differences have to be taken into account for individual circumstances when deciding which selling method to use.

In terms of a market outlook, figure 3 shows seasonal cow prices in NSW saleyards for the last two years, this year and the five year average.  On average the cow market bottoms out in May, before rallying through to September, on average gaining 14% over 15 weeks. This trend generally holds for Queensland, Victoria and South Australia as well, although southern markets ease after September where northern markets tend to hold.

Over the hooks markets will generally follow a similar trend to saleyards. However, at the moment they are already at a very strong premium to saleyards, so are unlikely to move too far until saleyards show sustained improvement.

Historically strong cow beef export markets should add further support to cow prices when supply starts to tighten. We have seen this in WA where cow prices were last week at 329¢/kg cwt, a 35-50% premium to east coast markets.

What does this mean?

Last week was not a good week to be selling cows in the saleyards, but this could change over the coming weeks - especially if some rain appears on the forecast.  If cows have to be sold in the coming month, booking in over the hooks is probably the best option. However, those who like a punt (and have grass) can hold for 8-12 weeks and hope for a return to recent values in saleyards that may provide a better result than selling OTH.

Over the longer term, cows will become very expensive if northern cattle areas get a decent wet season, because herd rebuilding will clash with the strong demand in export markets that looks likely to continue for some time yet.

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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