Grass fever to again drive cattle prices skyward

Rain set to support cattle market


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The latest cattle market forecast: It all hinges on rain.

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ALL signs are pointing to another dose of grass fever driving cattle prices up with good quality store cattle for sale likely to be as rare as hen’s teeth from now until Christmas.

Widespread rain through pastoral country in Queensland and Northern NSW has delivered a 25 cents a kilogram carcase weight (cwt)  kick across most store descriptions and saw yarding sizes shrink this week.

In the south, agents report the rain has assured graziers a spring and fostered a one-track mind to putting weight on cattle rather than looking toward trading.

The double whammy of a halt to selling and frenzied restocker action is expected to create strong leverage for retaining cattle prices well above five-year averages.

“It’s raining in pastoral country and there is more to come - that has created a very powerful swing in cattle market thinking and has made the proposition of a rally very real,” said Commonwealth Bank agri-strategist Tobin Gorey.

The rally would eventuate in two phases, he said.

“Those who’ve been waiting to restock until prices get cheaper will now realise they have to step in and that will force meatwork buyers and lotfeeders to play catch up,” he said.

The Eastern Young Cattle Indicator finished yesterday at 545c/kg cwt and many analysts, and agents, anticipate it will climb quickly to the $6 market and hover there until Christmas.

Mr Gorey points out, however, restockers have already demonstrated a willingness to pay well in excess and there are few limiting factors currently at play.

“Where people have carrying capacity they will want to rebuild,” he said.

Meat and Livestock Australia’s October industry projections update, released today, agree if the positive rainfall outlook for eastern Australia in October comes to fruition, it will go a long way to supporting young cattle prices.

The key points in the MLA forecast are adult slaughter remaining in line with the July update forecast of 7.25 million head and projected beef production and export volumes revised up as a result of higher carcase weights.

MLA’s market intelligence manager Scott Tolmie said with the herd rebuilding cycle still underway, the availability of lightweight stock through markets remains limited, which should see prices continue to track above the five-year average for the remainder of the year.

A scene near Alpha, Central West Queensland, post rain on the weekend. Photo: Kelly Butterworth.

A scene near Alpha, Central West Queensland, post rain on the weekend. Photo: Kelly Butterworth.

“Based on the more positive rainfall outlook for the rest of 2017, producers are not expected to further accelerate their current turn off at this stage,” he said.

Agents across the country are reporting an enthusiastic mood from store buyers and long faces on meatworks buyers.

Northern NSW and Southern Queensland agent Darren Perkins, George and Fuhrmann at Casino, said the market jumped very quickly on the back of the rain and inquires had increased out of sight.

There were a lot of late calves this season and many producers sold off any excess stock well before the rain, further exacerbating the very limited supply of good quality store cattle, he said.

Queensland Central Highlands agent Terry Ray, Landmark Emerald, said yardings were expected to be well below average from now until Christmas.

“We had 1200 head at our last sale, 300 down on what we’d expect at this time of year,” he said.

“The type of rain has been good - quite a major system  and it is rare to have green feed this early.

“We anticipate values to improve further.”

NSW/Victorian border agent Michael Scollard, Paull and Scollard at Albury, said the rain had seen a lift of up to $100 a head on steers in the store market and 20c/kg in the prime market.

It had stemmed the flow of northern cattle coming into the region and the tightened supply was only expected to push the market higher, he said.

“Most producers will look to grow cattle out rather than start trading - the feeling is you can’t buy younger ones cheap enough to turn a good profit,” he said.

Agents across the Eastern Seaboard said the mood from processors was very cautious, with plenty of talk still around about further reductions in kills and the tough world market trading environment.

MLA analysts say the competitive pressure on the export market is primarily underpinned by increased volumes of United States beef.

The October projections update says the US is Australia's greatest competitor in Japan, Korea and the US itself – markets which combined account for two thirds of

Australia's exports – and it is pushing increasing volume through all three.

Australian exports over the last nine months have been the lowest in five years. Coupled with increased US exports, Australia's market share in Japan and Korea is under pressure, according to MLA.

However, the record highs the Australian cattle market has reached in the past 18 months demonstrates the power of seasons in affecting local prices over and above what is occurring further afield.

Mr Gorey: “The backdrop is our cattle herds are way smaller than participants in the industry want them to be and the weather has now switched on to allow that to change.”

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