What does a high A$ mean for domestic cattle prices?

The A$ reached its highest level in nearly two years on 24 February, when it hit US$0.797. Since then, the A$ has eased back 3.5% to US$0.769, and now sits close to the level it started the year at (US$0.77).

On the back of these movements, it is reasonable to wonder whether the A$ exchange rate has affected cattle prices so far this year. However, as of yet, this hasn’t been the case.

The supply of available cattle, and strong competition from restockers, lot feeders and processors for the same limited pool remain the main drivers of price movements. The appreciating A$ has not had a significant effect on saleyard, feeder or over-the-hooks (OTH) prices.

Historically, it has been assumed that a high A$ would result in weaker saleyard prices. We have not seen those dynamics play out in 2020 and early 2021.

Since 1 April 2020, the A$ has appreciated by 15.2%. Over the same period:

• The EYCI has also appreciated by 21%
• Medium cow prices have risen 18%
• Heavy steer prices are up 26%.

Even since the start of the year, a period in which the A$ has been volatile, prices have not reflected A$ movements. Since 1 January the A$ has only marginally changed, and over the same period:

• The EYCI has also appreciated 2%
• Medium cow prices have risen 1%
• Heavy steer prices are up 2%.

While the A$ has had no noticeable impact on saleyard prices this year, when pitted against global beef supplies, Australia will continue to face ongoing challenges due to the softer currencies of competitors. As this plays out, it could have some impact on the margins processors and feedlotters competing with these countries experience.

© Meat & Livestock Australia Limited, 2021