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Tuesday, February 06, 2018

A North Queensland EYCI

By Matt Dalgleish  |  Source: MLA, NLRS, ACA

Key points

  • Northern Queensland young cattle markets share a moderately strong correlation to movements in the Eastern Young Cattle Indicator (EYCI).
  • The Northern Queensland Young Cattle Indicator (NQYCI) is currently 3.6% above the EYCI at an average weekly level of 555¢/kg cwt.
  • The NQYCI to EYCI spread usually fluctuates between a minus/plus 5% range during the season, dependent upon regional climatic factors. 

2018-02-06 Beef Fig 1

2018-02-06 Beef Fig 2

2018-02-06 Beef Fig 3

2018-02-06 Beef Fig 4

 

The Eastern Young Cattle Indicator (EYCI) is a weighted measure of sale yard prices for young cattle taken from twenty-six locations within Victoria, NSW and Queensland. However, price data isn’t used in the EYCI any further north than Roma. In this article we create a North Queensland Young Cattle Indicator (NQYCI) to compare to the EYCI fluctuations.

Price data for sales of all vealer or yearling steers and heifers, with a C muscle score and fat scores between 2 and 3, weighing more than 200 kg lwt was collected from the sale yards at Emerald, Gracemere and Charters Towers and used to create a weekly indicator for Northern Queensland young cattle.

Figure 1 highlights the movement in the NQYCI compared to the EYCI since 2015 showing the two markets share a good degree of interdependent movement. Indeed, analysis of the monthly returns correlation shows an R2 of 0.6125 which is indicative of a moderately strong relationship between the two indices – figure 2.

Analysis of the historic spread pattern shows fairly even distribution around a flat spread, with the average spread since 2015 sitting at a mere 0.1% discount – figure 3. The grey shaded region shows that 70% of the time the spread has fluctuated between a discount of 5% to a premium of 5%. Similarly, the 95% barriers indicate that movements outside of 10% discount or premium are considered extreme.

As of last week the NQYCI was sitting at 555¢/kg cwt, a premium of 3.6% to the EYCI on a weekly average basis.

A look at the average seasonal moves in the spread (figure 4) highlights that the trend is influenced by regional climatic factors. NQYCI spreads to the EYCI tend to peak around a 5% premium during the Summer northern monsoon cycle and enters a trough during Winter of a 5% discount magnitude. 

 

What does this mean?

This is because as pasture growth is strongest during the northern wet season encouraging young cattle buyers in the north, while dryer conditions in the south limits buyer activity. As a result, northern young cattle spreads to southern markets tend to expand over Summer as northern producers aim to maximise pasture utilisation and weight gains before feed conditions deteriorate into Winter. 

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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