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Thursday, July 02, 2015

When the 90th percentile looks miles behind in NSW

By Augusto Semmelroth  |  Source: MLA's NLRS

Cattle markets have recovered remarkably in NSW since April, with most steer categories up by 30-35%. This solid uptrend has seen several price records broken, and the gap between the 90th and 100th percentile levels widening remarkably during the period. Lamb markets have also managed to make a move after recent rains to reach their high 90th percentiles, while mutton lags behind.

Key points:

  • The surge in finished cattle prices across NSW and Victoria over the last three months has been nothing but astonishing, with most categories rallying 120-160¢/kg cwt.
  • Given prices were already tracking at historically high levels, records have consistently been broken in the last couple of months as the market continued to trend higher.
  • 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, when looking at the widening gap between the 90th and 100th percentile it becomes clear that current prices are remarkably strong. For most steer categories, that difference is in the order of 170-180¢/kg cwt.
  • To put this gap into perspective, a heavy steer of 350kg cwt sold at the 90th percentile equates to $1274/head. At current price levels, they would fetch $1886/head. That’s a $612 difference (48%  premium) over a steer sold at the 90th percentile.
  • As of last week, all NSW cattle indicators except cows were quoted at a 40-50% premium over their 90th percentile levels.
  • Cow markets are also faring well, but remain comparatively undervalued to steers by historical standards. As a general rule, cow prices track 45-55¢ below heavy steers, while current discounts are reaching 125¢/kg cwt.
  • NSW feeders broke through the 300¢/kg lwt mark, which will see lotfeeder margins squeezed going forward.
  • On the sheepmeat front, lamb markets are also benefiting from recent rains to see price finally moving another leg higher over the last few weeks.
  • In percentile terms, merino lambs are the best performing category. This suggests producers may be holding more stock for breeding purpose to see supplies tightening and prices firmer.
  • Light, trade and heavy lambs are in their 97-98th percentile levels, with trade and heavy lambs around the 600¢/kg cwt mark. 

Read more about how to interpret percentiles

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