Rain-driven cattle price rally likely to be fleeting

Rain-driven cattle price rally likely to be fleeting


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GONE: The action at Carcoar store cattle sale on Friday. Photo: Rachael Webb.

GONE: The action at Carcoar store cattle sale on Friday. Photo: Rachael Webb.

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Cattle market story remains one of high volatility.

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CATTLE price spikes courtesy of rainfall in some key pastoral regions in Queensland and NSW are likely to be fleeting, even with more useful weather conditions continuing this week.

Lighter cattle have been bid higher and the heavier the cattle the larger the gains, prompting Commonwealth Bank analyst Tobin Gorey to describe the market as posting ‘sharp to hefty gains’ on the back of rain.

The benchmark Eastern Young Cattle Indicator pushed through the 500 cents a kilogram carcase weight mark yesterday, a 12 per cent rally from mid-August.

It’s now sitting at 503c/kg, the highest point since the start of July.

However, the cattle market story remains one of high volatility as producers desperately wanting to rebuild herds walk the tightrope handed them by drought.

Leading market analysts including Mecardo’s Angus Brown believe the EYCI could be at the 600c/kg mark at the drop of a hat should a big early wet season arrive.

Otherwise, it would likely fluctuate between 450 and 520c/kg, with the spikes delivered every time a rain event of some description arrived, he said.

Producers and agents have reported the best falls arrived in Queensland’s Darling Downs and central regions and NSW’s central west, although it was, yet again, very isolated.

Meat and Livestock Australia’s chief cattle market man Scott Tolmie said the past week’s rain delivered some relief but the drought had by no means broken.

“The deficit is such that it will take several good rainfall events and unfortunately the outlook for November on is more dry,” he said.

Bureau of Meteorology forecasts now have an El Nino occuring in 2018 at 70pc likelihood. El Nino is associated with a later-than-average start to the northern wet season and drier-than-average conditions across the eastern states.

“This rain has meant some people have been able to hold off decisions a bit longer but those who have held cattle over winter will have to make a call on further destocking very soon,” Mr Tolmie said.

“Areas that don’t typically get winter rainfall are now in the season where they do.”

Most analysts agree the EYCI has held up very well considering slaughter volumes are travelling at least 10 per cent higher.

That has been on the back of strong overseas demand and relatively good finished prices.

Mr Tolmie also pointed out higher-than-typical volumes of the cattle being offloaded were currently outside of EYCI eligibility.

The EYCI’s stability in the weeks leading up until this recent rain was reflective of a ‘wait-and-see’ approach, MLA analysts said.

This was a particularly pivotal time of the year where things often turned quickly, they said.

The resilience of cattle prices was one of the factors credited with driving a 6.5pc rise in the  National Australia Bank September rural commodities index, released this week.

NAB agribusiness economist Phin Ziebell said although there had been a big drop in demand for restocker cattle, stronger cattle prices were reflective of the demand for finished cattle.

“However, if demand subsides and high United States production continues, then we may see further EYCI downside beyond drought-influenced domestic stocking levels,” he said.

Overall, analysts seem to agree that a continuation of the one-off isolated rain events will likely see another wave of destocking in the north in the near future and ensuing further down pressure on prices.

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