Cattle market stabilises, but lower prices nigh

Large swathes of Victoria, NSW and Queensland recorded rainfall of up-to 25 mm over the past week, while at the same time, processor activity in the saleyards edged higher again, as reflected by eastern states weekly cattle slaughter hitting a 22-week high of 133,960 head.

The impact on the market was mixed, with heavier cattle finishing Wednesday’s market slightly above the week prior, while the conditions were unable to reverse the fall in young cattle prices.

The Eastern Young Cattle Indicator (EYCI) closed Wednesday at 650.5¢/kg cwt, down 5.5¢/kg, while heavy steers were 299.5¢/kg lwt, up 0.5¢/kg.

Interestingly, while cattle prices are still at very high levels in a historical context, the first of the eastern states cattle indicators has fallen below year-ago levels. Medium cows, for three weeks now, have been lower year-on-year, which is the result of the opposing market trends at the same time each year.

For medium cows, the recent year-on-year decline is the first since July 2014, while for all the steer indicators, consistently lower year-on-year prices have not been registered since February 2014 – highlighting the remarkable run the Australian cattle market has had.

Looking forward, as the end of the year approaches, it is likely that more of the indicators (heavy, medium, and trade steers) will also fall below year-ago levels, and this is likely to be a common theme for 2017.

How far below the indicators fall depends on many factors, like whether there is a return to widespread drought conditions, or whether there are any changes to the current export environment. However, working in the favour of producers selling cattle is the ongoing expectation of relatively tight supplies. While the prospect of lower prices compared to the year before may sound concerning, it must be remembered that when comparing to 2016 prices, especially those from the first eight months of the year, they were record nominal prices.