“As January goes, so does the year”

With the historic highs seen in the Australian cattle market in 2015, there is now plenty of interest around predictions for how the market will perform in 2016 and whether or not the strong prices from 2015 can be sustained.

Each year there are many forces working for and against the Australian cattle market, including market access, competitor country beef production levels, competitor protein production levels, Australian beef production levels, currency movements, tariffs, world beef prices, world poultry prices, seasonality – to name just a few.

However one simple indication of how the year often performs can be derived from the old adage “as January goes, so does the year”. For the Eastern Young Cattle Indicator (EYCI), the relationship is particularly strong, with the year-on-year performance for January (i.e. averaging higher or lower) being reflected for the year 78% of the time – or on 14 occasions out of the past 18 years (as far back as year-on-year comparisons can be made for the EYCI). This is displayed in the table below.

Interestingly, if there was a positive year-on-year change in the EYCI for January, the likelihood of the annual average being in the same direction actually increased to 90%.

Furthermore, of the four years when the January direction was different to what the annual average became, three of the January changes were negative, but the year eventually became positive (2003, 2010 and 2014).

In short, despite the plethora of forces working for and against the Australian cattle market, if history is to repeat itself, we may only need to wait a few weeks to get a strong clue as to how the market will fare in 2016. There will of course be seasonal variance, but by and large, it may well be an indication of whether or not the annual average cattle prices in 2016 will be higher or lower than 2015.