AS Australian cattle prices continue on their stratospheric trajectory, the unusual sight has emerged of restockers competing directly with processors in saleyards for medium and heavyweight meatworks-type cows.
While there has always been restocker/turnover interest in the lighter, plainer end of the cows, processors generally only ever compete among themselves for the better-conditioned medium and heavyweights.
But now it is becoming commonplace to see restockers/traders getting stuck into prime-end fat scores 2, 3 and 4 right up into the heavyweights.
Dubbo last Thursday was a good example.
In the medium weights restockers paid to 300c/kg to take 55 of the available D2s while processors paid to 275c for the remaining 11 head.
In the same weight range, processors got 90 of the D3s at a top of 292c but restockers outbid them to take 34 of the same description at a top of 297c.
In the heavyweights, restockers paid an average of 311c for nearly half of the D3s while processors averaged the remainder at 285.
Restocker activity continued into the D4s taking 30pc of the offering at an 8c/kg higher average than paid by processors.
It would be logical to assume that if the interest is genuine restocker rather than turnover, it would be reflected in quality attributes such as breed, age, joining status etc that set the cattle they were interested in apart from the general run of culled, meatworks type cows. But there is no indication of this in the market reporter's comments.
Rather it would seem the restockers/traders may simply be relying on a bit of weight gain and upside in the market to hopefully turn a few dollars.
No doubt the proliferation of feed in many parts of NSW and Victoria is encouraging the current buying frenzy.
There is also probably an element of windfall profit from cattle bought cheaply before the rain and a willingness to re-invest this into trading stock.
But if it is primarily turnover related activity, the trick as always will be to get in and out before rates unwind to any great extent.
Reliance on further rain to keep supply tight and prices elevated might work up to a point but beyond that the latest news on the global meat trading scene is a little troubling.
In the United States, beef processing has returned to normal levels much faster than many thought possible.
According to US-based analyst Steiner Consulting, non-fed cattle slaughter last week was 0.5 per cent higher than a year ago. Fed cattle slaughter was 2.5pc under last year but overall beef production was 2.1pc higher than a year ago.
It is becoming commonplace to see restockers/traders getting stuck into prime-end fat scores 2, 3 and 4 right up into the heavyweights.
The reason the US is now swimming in beef is that cattle backed up in feedlots while processing plants were down because of coronavirus and this is now resulting in heavier carcase weights.
Steiner thinks that the current inventory of cattle on feed for more than 150 days is 42pc higher than year ago level.
That suggests carcase weights and thus total supply of beef will continue to run well above the odds for some time.
The impact of this can be seen in the dramatically altered price relationship between fed-beef cuts and 85CL boneless beef.
In early May when lean beef supply was extremely tight and retailers were chasing product, clods, inside rounds, flats and knuckles (all fed-beef cuts) were trading at 2.8 times the price of 85CL.
In the past couple of weeks that relationship has fallen to as little as 0.82 times.
As Steiner points out, at that level those cuts would easily go into the grinder. The reasons they are not is that ground beef retail demand has slowed due to elevated retail prices and the uncertainty over the extent and timing of recovery in the foodservice sector.
Concern about a second wave of the virus and a continuation of high unemployment levels are implicated.
This abundance of supply is now acting to limit demand for imported product.
As well, US domestic beef demand usually slows down in July and August so end users are not rushing to take up the offers of overseas packers at the levels they are holding out for.
Indicator 90CL blended cow (US East Coast Aust/NZ lean, FOB US port) fell a further US$5/cwt (hundredweight) last week to $US255.
That is US10/cwt off the May peak of $265, not quite freefall but a steep decline nevertheless.
It should be remembered that imported 90CL spiked by $US57/cwt between mid-March and May due entirely to flow-on factors emanating from the virus.
Before the virus influence the market was muddling around $US208/cwt.
The simple message is there is potential for a lot more downside.
On the flipside, as discussed last week, the US is now in a supply position to go in hard in our prized premium Asian markets.
Not a happy prospect for Australian export processors.
Rising rates add more red ink
WITH plenty of red ink already on the books, processors are continuing to put more money on the table in the quest to source cattle.
But as the recent week-long closure of Dinmore demonstrated, there is no guarantee that extra money will bring forward enough cattle to allow the lights to be turned on every day.
As one processor said earlier this week, putting 20 cents with the grid just adds an extra $60-70/head to an already big loss. It is not resulting in extra cattle coming forward.
Despite this, no one seems ready to blink just yet.
In Queensland, one operator on the Downs is pushing hard for cows with a grid rate of 565c for heavyweights over 300kg.
Other majors in south east Qld generally added 10c in the past few days to bring their cow rates to 550. Four-tooth ox rates also lifted to 625-630c.
In southern NSW and SA, public grids have not been revised since mid-May with ox holding at 615c and heavy cow at 560c.
