Cattle market is now abnormal, how we got here: NLRS boss

That's the view of Meat & Livestock Australia's senior analysts who say the actual outlook, both seasonally and in terms of market dynamics, does not warrant the lack of confidence being demonstrated.

So why is it happening?

The only reason can be that the scars from the last drought run so deep that producers are taking no risks.

These are the sentiments being expressed by some analysts, agents and industry leaders now as cattle prices continue to plunge. The Eastern Young Cattle Indicator yesterday dipped below the 400 cents a kilogram carcase weight level.

Acting National Livestock Reporting Service operations manager Ripley Atkinson, speaking in an Agriwebb webinar this week, said the cattle market had behaved abnormally since June and producer attitudes had played a major role.

In a nutshell, producers were offloading stock for a drought that had not yet arrived, he said.

"They are delivering secondary quality animals that aren't an even, consistent draft, that don't have condition and don't have weight," he said.

"That's giving buyers the luxury of choice. Buyers don't need to clamber all over one another to access animals."

To understand how the cattle market has declined to the point where young stock are now worth a third of their long-term average value, the past five years has to be taken into account.

Five years ago, essentially all of Australia's cattle country was in severe drought - the worst seen in a very long time.

"We saw a lot of destocking. Breeding ewes and cows were removed from flocks and herds," Mr Atkinson said.

"Stock numbers diminished to their lowest levels for sheep in 100 years and for cattle, the lowest in close to 50 years.

"Then large parts of the country got rain and rebuilding started. It was the most intense period of rebuilding we'd seen in 60 years. Sheep numbers rose from 64 million head in 2020 to 80m now, which is the highest number we've had in the modern flock era.

"That meant that by this year, yarding sizes had increased and prices came under a bit of pressure - that's normal. It was expected and we'd been talking about it happening for 18 months."

But from June, things started to move into the abnormal.

Many agents have been quoted saying the talk of El Nino and the panic about pending dry times whipped people into a panic.

"There's no question the 2017-19 drought was so hard it burnt a lot of people," Mr Atkinson said.

"A lot kept stock in the hope it would rain and ended up with them longer than they should have.

"They now have numbers but don't want to get themselves in the position where they overstep their country's ability to cope.

"And so they have made decisions well before the drought has come this time."

But that has seemingly tipped the scales into the abnormal.

"We are seeing southern producers who are having their fourth consecutive good season in a row not buying stock because they are worried about something not even here yet," Mr Atkinson said.

While managing risk must always be part of the strategy, there is opportunity in today's market that producers have been urged not to overlook.

Firstly, Mr Atkinson says those who "get the quality of their animals right now" will be supported in the market.

"Across every categories, it is evident that quality pays, even under the current circumstances," he said.

Exiting stock prematurely is not paying.

Secondly, El Nino conditions for most of the country are forecast only until next autumn.

And the global dynamics suggest plenty of optimism on the horizon; particularly the potential for an intense rebuild in the United States to wipe big volumes of beef from the global market and create a lucrative gap for Australia to fill.

Both these elements has led Cattle Australia chair David Foote to suggest that the peaks that cattle prices rose to during 2022 will again be seen.

"The US cattle herd and their beef exports has such a big impact on us," he said.

"The rebuild of their herd has been slower than originally forecast but cattle prices at the cow-calf level are already rising dramatically, in line with what happened when our rebuild started.

"We will land back where we were. There is a lot to be confident about and it's not a long way off."

Mr Atkinson said global dynamics would play a bigger role in early 2024 than seasonality.

"Global dynamics are changing in a good way for Australian producers to capitalise," he said.