Down from the peak: where will prices settle?

While store cattle markets this past week have corrected under the influence of adjustingand low slaughter market rates, it has been of interest to read the latest beef industry projectionsfromMeat and Livestock Australia (MLA).
Nanjing Night Net

Therein MLA has advisedtightsupplies will remainthe driving force behind the support of short term cattle prices (and intothe rebuilding phase). However longer term prospects – beyond 2018– prices areexpected to settle somewhere in between existing long-term averagesand the current record highs.

That is possibly not thenews that most cattle breeders would want to hear, especially those who have forked out upwards of $2000 to $3000 for breeding females that will, some time in the future, reward them with a smaller than anticipated calf unit sale price.

There isno doubtthepast three to four years of severe drought conditions has exacerbated hardshipsfor many cattle breeders, particularly those peeved by the past discomforts oftwo or more decades of below average cattle price returns.And these conditions combinedhave resulted in the severe and sharp decline in the nation’sherd numbers that have plunged to a 20-year low. They are estimated at26.3 million head,according to MLA calculation in this month’supdate.

MLA says restockers are the driverof the current record prices of young cattle. It says the restocker purchase premiumiscurrently49c/kg lwt or 8 per cent more than processor payments, within the market data captured in saleyards by MLA that leads to the compilation of theEastern Young Cattle Indicator(EYCI).

This comparesadversely to the restocker premiums of6pc and 5pc paid in 2010 and 2011respectively, it states.

MLA expects the extremely tight supply conditions to remain for the duration of 2017, before slowly increasing from 2018 onwards.It also suggests that the rebuilding phase will take longer in the most depleted areas on western Queensland and NSW where declines of up to 40pc were recorded in just three years, whereas in other areas the declines were up to 20pc.

MLA says while Australia cattle supplies are at such tight levels, Australian cattle producers are being insulated from generally softer global markets. And with Australian prices moving in a different direction to those globally, it becomes more likely that once Australian production eventually increases, prices will realign with global markets.

Exactly where this level may be will depend on global demand,exportsuccess,international competition and the strength of the dollar at the time.

Let’s all hope that is not “the higher the peak, the deeper the trough” scenariobecause those investing currently may get severely hurt financially.

Restocker buyers lined up in force for breeding heifers this week, paying to $1500 for unjoined lots and to $3060 for those in calf.

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