By Angus Brown | Source: MLA's NLRS
The Western Australian cattle market has set the benchmark for Australian cattle prices over the last two years, streaking ahead in line with international values. In contrast, abundant supplies in the east depressed east coast prices. This year has seen east coast cattle prices attempt – and then fail – to catch those in the west. However, WA prices are about to reach their seasonal peak.
Figure 1 shows the WA feeder steer saleyard price and the Eastern Young Cattle Indicator (EYCI). WA feeder steers have continued to rally from record levels in 2014, gaining a further 80¢ from the start of the year to a peak of 315¢/kg lwt two weeks ago, before easing to 299¢ last week.
The EYCI has gained 60¢ since the start of the year to sit at 260¢/kg lwt. However, it remains 39¢ behind the WA feeder despite traditionally trading at a premium to the WA price. That said, east coast feeders are at similar levels to those in WA. The NSW and Victorian Feeder Steer indicators are currently sitting at 283¢ and 270¢/kg lwt respectively.
The ongoing premium prices in WA can be explained by close to average rainfall across much of the south west of WA, and well above average rainfall in some pastoral areas over the last three months. This, along with lower grain prices in the west, has contributed to stronger demand and weaker supply than in the east.
Before we get too carried away by high WA prices, it’s important to note that June traditionally marks the peak of WA store cattle prices (figure 1), while slaughter cattle prices peak in July (figure 2). Last year, WA feeder steer prices fell nearly 20% from June to August, while on average prices fall 13% as feeder demand weakens. WA still has a very seasonal lotfeeding sector, with cattle on feed numbers declining dramatically in spring as the supply of finished grassfed cattle picks up significantly.
Heavy yearling prices traditionally remain steady through June and July at seasonal peaks because of tight supply. They then typically ease 5% through to October, and 10% to December as the grassfed season picks up.
Regular Mecardo readers in WA would see the opportunity to sell cattle and buy sheep or lambs, given our lamb price analysis of a couple of weeks ago. However, those simply looking for some pricing indications for spring cattle sales would do well to expect slaughter cattle prices to be similar, or marginally stronger than last year, as prices are due to ease. Feeder cattle prices will no doubt go through their seasonal decline soon, but will recover later in spring, as lotfeeders look for cattle to fill the post Christmas supply void.
With east coast prices now within cooee of WA prices, we can no longer look there for price upside indications. The next leg up is likely reliant on rainfall on the east coast.
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