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Friday, July 15, 2016

Heavy steers setting pace in climb of Mont von beef record

By Angus Brown  |  Source: MLA

2016-7-15 Beef Comment Fig 1

2016-07-15 Beef Comment Fig 2

It would appear that processor slowdowns and shutdowns, which have been widely publicised this week, are having an impact in Queensland markets. However, in the southern states records have continued to fall for heavy and feeder cattle.

After last week’s spike in yardings, cattle supply in saleyards moved back to a more normal level of around 50,000 head.  Demand appears to have weakened in Queensland, with heavy and feeder steer prices easing.  Interestingly Cow prices in Queensland rallied 14¢ to hit 513¢/kg cwt, just 4¢ off the record hit a month ago.

Heavy Steers in NSW and Victoria rallied to new record highs this week, hitting 638¢ and 651¢/kg cwt respectively.  Figure 1 makes an interesting comparison, with QLD Grainfed Over the Hooks price stuck at 575¢/kg cwt this week.  This means a 350kg cwt grassfed steer in Victorian Saleyards is worth $266 more than a Grainfed Steer delivered to works in Queensland, which is still subject to a grid.  There is not a lot of incentive to send cattle direct to works in southern states at the moment.

Analysis of processor margins this week suggests processors are losing money at saleyard values.  Perhaps the over the hooks rates are more reflective of where prices need to be to break even.

The same analysis pointed to the similarities between price trends this year and in 2005.  Figure 2 shows the EYCI for the last two years, and 2005.  If the EYCI continues to track 2005 it’s likely we’ve seen the limit of prices.  From here we may see values ease a little, before having another run at the record in August.

The week ahead

State cattle indicators have shown plenty of volatility in recent week, while the EYCI has remained relatively steady.  In these times of uncertain demand, due to shifting capacity, and even move uncertain supply of finished cattle volatility is to be expected.  Interestingly this hasn’t translated into the EYCI, which has remained relatively steady for 3 weeks, with buyers apparently comfortable with current prices, but not willing to push them further, even if they miss out on cattle.

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