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Medium cows edge closer to imported 90CL
05 November 2015
Recent months have seen the US imported beef market retreat at virtually the same rate it lifted in 2014, causing some concern for the Australian cattle market.
However, while the US market has been declining rapidly, Australian cattle prices have been far more resilient, assisted by a lower A$. As a result, the US imported 90CL price premium over the Australian medium cow indicator has lessened, as illustrated in the figure below.
During 2010 and 2011, imported 90CL beef into the US averaged a 111A¢/kg premium over the medium cow indicator. This stretched to a peak of 428¢ in September 2014 – almost four times the average of 2010 and 2011 – as a result of the drought depressed Australian market.
However, as the US imported beef price has been retreating, the Australian market has continued to move higher, buoyed by a jump in Australian cattle prices this week as a result of widespread showers, and the gap has closed to 150¢.
Looking forward, the Australian market is expected rise further over the coming weeks, due to anticipated tighter supplies after the rain, while the trend in the US market is unlikely to reverse and will only stabilise at best. Consequently, the margin between imported 90CL and medium cows will more than likely become even closer as the year draws to a close.
How much closer? Interestingly, the closest the two indicators have come over the past five years was 66¢ in 2010, but rarely has the difference been less than 100¢. It is unlikely that a margin that narrow will be seen this year.
