Price outlook firm for Victorian weaner sales

Price outlook firm for 2020 weaner sales

Sales
HIGH EXPECTATIONS: The 2020 weaner sales series in southern Australia will set the precedent for the year's beef cattle market.

HIGH EXPECTATIONS: The 2020 weaner sales series in southern Australia will set the precedent for the year's beef cattle market.

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The 2020 weaner sales series in southern Australia will set the precedent for the year's beef cattle market.

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PIGS and rainfall will dictate how cattle prices play out in Australia for 2020.

And Victoria's famed January weaner sales will be the first indication of the year just how much.

Prime returns have been outstripping store cattle prices all year thanks to strong export demand and herd numbers continuing to fall as much of the country battles continuing drought.

Meat & Livestock Australia reported the national heavy steer indicator operating at an average premium of 49 cents a kilogram to the Eastern Young Cattle Indicator, with China's African swine fever epidemic and a low Australian dollar boosting finished prices.

"A key indicator of the strength of the international market, the US imported 90CL beef prices, are trading at record levels of 928c/kg (Australian), just below its November peak of 968c/kg," MLA said.

"National cattle slaughter for the year-to-October totalled 7.1 million head, an increase of 7 per cent year-on-year.

"Victoria and WA recorded the largest increases in slaughter, both increasing 12pc from the same period in 2018, while NSW increased 7pc."

Nutrien Ag Solutions south-east region livestock lead Adam Mountjoy said this all pointed towards very favourable trading conditions at this year's weaner offering.

"There is an opportunity for producers that have been turning off heavyweight bullocks for $1800 to $2000 [a head], to step back in [to the market] at half that rate at about $1100," Mr Mountjoy said.

"The ability to trade has never been more favourable when comparing the higher prices achieved for heavy weight cattle over the last six to eight weeks with those weaners coming onto the market in January."

At the 2019 new year weaner offering, black calves generally traded in the 300-330c/kg bracket, with the best lines making above that, with most pundits now saying all indications point towards prices remaining at the same level in 2020.

He said last year's spring-drop calves have been meeting solid demand because of their heavy weights.

"They have been making good money at feeder entry weights, at anywhere from 290-220c/kg, it has been very solid the past few weeks," he said.

"We tested the market for our autumn-drop calves in November, and the opening sales were quite pleasing, but as the season hasn't gone with us in places and the processing cattle have come back in rates, some 20-30c/kg liveweight in the past three weeks, there has been a reduction in demand for lighter weight weaners.

"Autumn-drop weaners are underpinned at the moment by live export orders, so we are in for an interesting time in the new year, given the condition of our northern trading partners."

With an obvious price gap having been seen between the early December weaner sales in South Australia's Naracoorte and Victoria's Euroa, Mr Mountjoy said weight would be a big factor in demand for coming sales.

"A higher content of EU accredited and heavier feeder weighted steers at Naracoorte certainly increases the cents a kilogram return seen in the south-east, as opposed to central and north-east Victoria," he said.

"Lotfeeders will absorb a majority of 380kg-plus cattle and live export the lighter weights, but it will be on local producers to take the rest.

"This year all the boxes need to be ticked to obtain the high-end prices, that being weaned, weight and accredited for various grass finished programs; I think if those are all ticked you will see a premium."

According to MLA, the EYCI has traded between 468 and 520c/kg since the end of August, with November prices almost on par with prices from the same time last year.

As of December 13, it was sitting at 495.75c/kg, about 30c/kg below the same time last year, and a dip of more than 20c/kg in the past month.

Angus Gidley-Baird, Rabobank, said in the Global Animal Protein Outlook 2020 that global demand fueled by falling pork production will be countered by season conditions stalling producers from restocking.

"There is considerable upside potential for prices, given livestock inventories for both sheep and cattle are at their lowest levels in over 20 years," Mr Gidley-Baird said.

"And it is this low stock availability that will see the market remain highly sensitive to substantial rain events."

While the ongoing drought being experienced in much of the country is preventing any substantial increase in prices for cattle that need feed, he said the very low stock numbers would also stop prices from heading downwards.

"Lower inventory numbers and strong global markets will support prices for heavy-finished cattle, in particular, while lighter classes of cattle will remain more exposed to seasonal variability," he said.

"That said, the price spread between heavy and light cattle will narrow as soon as it rains, with lighter cattle set to achieve the biggest gains in price."

MLA senior market analyst Adam Cheetham agrees with this outlook, adding that the southern region, including Victoria, had been supporting prices in recent months.

"Looking ahead, the market is unlikely to see any significant price corrections without widespread rainfall," Mr Cheetham said.

"However, the modest improvement in conditions in the south provides an indication of potential upside, with southern regions currently supporting the north, where conditions are hampering restocker activity.

"On the upside, the demand for well-finished cattle is showing considerable strength in the market, with prices improving this year and likely to find continued support."

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