How did the cattle market open 2018?

• Bureau of Meteorology (BOM) seasonal outlook to favour restocker buying of Eastern Young Cattle Indicator (EYCI) eligible cattle, particular for northern NSW and Queensland producers

• The EYCI back year-on-year but could find support in the short-term

• Queensland adult cattle slaughter up 6% year-on-year (week ending 12th January).

Over-the-hooks (OTH) indicators remained largely unchanged across all eastern states last week, with some contributors not yet quoting. In the last month, above-average seasonal conditions have prevailed across much of the south, while parts of northern Queensland have experienced below-average rainfall. However, the latest BOM three-month outlook indicates improved seasonal conditions across much of the country, which may provide support to over-the-hook indicators, as buyer competition strengthens.

This time last year, cattle supplies were very tight as the herd rebuild phase commenced and consequently, competition for well-conditioned cattle across all categories was strong. As a result, OTH indicators in Queensland, NSW and Victoria are considerably lower from where they opened last year.

Last week in Queensland, compared to the same time last year:

• trade steer over-the-hook indicator (240–260kg, A-C muscle) averaged 476¢ – back 52¢/kg cwt
• heavy steer over-the-hook indicator (300–400kg, A-C muscle) averaged 486¢ – back 52¢/kg cwt
• medium cow over-the-hook indicator (260–280kg, A-E muscle) averaged 409¢ – back 49¢/kg cwt.

In NSW:

• trade steer over-the-hook indicator (240–260kg, A-C muscle) averaged 478¢ – back 63¢/kg cwt
• heavy steer over-the-hook indicator (300–400kg, A-C muscle) averaged 483¢ – back 63¢/kg cwt
• medium cow over-the-hook indicator (260–280kg, A-E muscle) averaged 397¢ – back 49¢/kg cwt.

In Victoria:

• trade steer over-the-hook indicator (240–260kg, A-C muscle) averaged 502¢ – back 52¢/kg cwt
• heavy steer over-the-hook indicator (300–400kg, A-C muscle) averaged 493¢ – back 63¢/kg cwt
• medium cow over-the-hook indicator (260-280kg, A-E muscle) averaged 405¢ – back 33¢/kg cwt.

The number of adult cattle processed across the eastern states last week lifted 4% year-on-year, to 102,436 head. Queensland adult cattle slaughter increased 6% compared to the same period last year, to 40,334. In NSW, however, there was a slight 3% decline year-on-year to 29,096 head, while Victorian adult cattle slaughter increased 34% over the same period, to 24,061 head – the highest move across all states.

The EYCI closed the week ending 12 January at 562.75¢/kg cwt, back 77.75¢/kg cwt on the year prior. Looking at this time last year, the markets had begun to consolidate following record prices earlier in 2016. However, restocker demand and opportunistic buying reached an unprecedented level following above-average rainfall in particular for key cattle regions, which further restricted an already limited pool of cattle. Consequently, the EYCI moved 3% higher throughout January last year, which also represents the same margin of increase the EYCI has averaged during January in the last five years. Therefore, it could be expected to move in a similar upwards trajectory, but will depend upon factors such as the seasonal break and restocker appetite.

Last week, restocker buyers maintained the premium they were paying for EYCI eligible cattle at the close of last year , with a 19¢/kg and 46¢/kg cwt premium over that paid by feeders and processors, respectively. However, feeder buyers accounted for just over 53% of EYCI eligible cattle last week – albeit with yarding numbers down given holiday closures. This trend is not dissimilar to how last year opened, feeder buyers had four consecutive weeks purchasing over 50% of EYCI eligible cattle, easing into February as restocker and processor buying increased. The prospect of some good rainfall in the weeks ahead could see restocker activity spike for EYCI eligible cattle – as was the case in October 2017 – supporting prices in the short-term.