Caution, Awareness & Frustration – a snapshot of the Australian cattle market

The past four weeks has seen some very interesting market “behaviors” emerge through the AuctionsPlus commercial cattle sales, reflected by increasingly cautious buyers, hyper-price aware vendors and a growing number of regionally frustrated producers.

Given the unique features of the AuctionsPlus’ platform, the final sale price for a line of cattle is just the tip of the iceberg in the context of the state of the entire cattle market each week. In recent weeks, the pre-auction catalogue views, immediate clearance rates at the close of auctions and post-sale negotiations have revealed a far more colorful and insightful story.

In the final three weeks of March, the auction clearance rate at the immediate end of the commercial cattle sales (held each Friday morning) were below 60%. The last time this occurred was in the final quarter of 2020. The lower clearance rates throughout March 2022 were also represented in the average clearance rate for the first quarter of 2022, at 69%, compared to 84% in the final quarter of 2021 and 73% in the first quarter of 2021. However, when looking at pre-auction catalogue views and user logins throughout each sale in the first quarter of 2022, the lower clearance was not due to a lack of interested buyers. Indeed, online interest was at record high levels throughout the quarter. So, why the lower clearance rates?

Cautious and judicious buying during each of the commercial sales has been suppressing the immediate clearance rate in recent weeks, as buyers weigh up the desire to secure cattle against signs of a marginally weakening market and some seasonal uncertainty. Since reaching a peak in late January, the benchmark EYCI has eased 9% through to the end of March (albeit still exceptionally high in the late 1000c/kg range), while AuctionsPlus national 400kg+ steer indictor has plateaued around $2,400/head.

Online, the big difference in the market through March has been the determination of buyers to hold the line on price throughout the auction, not willing to chase cattle at any cost. In other words, some buyers have been willing to walk away, or more accurately “log-off” and play the waiting game – the first time this has occurred over a multi-week period since late 2020. This could also indicate that these same buyers are either confident that numbers will continue to flow into the market in the coming months, or seasonal conditions at this time of year are not as rosy, or paddocks not as saturated, as in 2021.

Adding to the lower clearance rate at the close of each auction has also been the reserve price levels set by producers’ pre-auction, who are deservedly aiming to capture the highest possible price. Indeed, the awareness from vendors of current market levels has been rising throughout March, both conscious of the current market dynamics, but also very mindful of the unprecedented run of prices and expectations for a progressively cooling market throughout 2022.

Despite the slight easing of the young cattle market in March, 70% of AuctionsPlus commercial categories averaged higher through the March quarter, led by PTIC heifers which averaged 8% higher on the previous quarter, at $3,101/head. Underpinning the awareness from producers, PTIC heifers for the March 2022 quarter averaged 34% and 86% higher on the first quarters in 2021 and 2020, respectively. Very similar price rises were registered for the lightest (less than 200kg) steer and heifer categories for the March quarter, averaging $1,831 and $1,780/head, respectively.

Thus, vendors are acutely aware of the value of what they currently hold…and are not yet willing to give them up easily!

With the cautious buyers and price aware vendors, post-auction negotiations have remained at record levels during March, with 13-19% of sales confirmed in the hours and days following the auctions. In second week of March, the immediate post auction clearance rate was 64%, jumping to 83% in the following days. In the most recent week, the immediate clearance rate was 55%, growing to 68%, over the following days. As Figure 2 below shows, the absolute number of cattle transactions confirmed post-auction have been climbing in recent weeks.

Cattle production in Australia is an exercise in patience, frustration, and relief. In terms of the seasonal conditions heading into mid-autumn, frustration might be a polite way to express the feelings of many Central and Northern Queensland producers after another tepid finish to the wet season. As per the excellent seasonal summaries provided by the Bureau of Meteorology, the below map clearly shows the underwhelming rainfall through larger swathes of Queensland during the first three months of 2022. Below to very much below average rainfall, at a time when season defining rains are “normally recorded”, will again put plenty of pressure on cattle enterprises heading into the second half of 2022.

While at a smaller scale, both in terms of area and impact, there has been increasing reports of drier conditions starting to impact parts of western Victoria and eastern SA, with producers cautiously watching the forecast for the start of some traditional autumn fronts. While many southern regions have plenty of moisture to commence a full planting schedule, there has also been a noticeable increase in voices saying, “we could do with a good soaking rain”.

However, there is still time for some improvement. Given that the wet season doesn’t officially conclude for another few weeks, there is still some hope for further falls throughout drier regions – albeit with the current outlook not indicating any large events on the horizon. For the drier southern regions, the traditional autumn rainfall patterns are optimistically not far away, with some of the rain hopefully shifting from drenched coastal regions to southern inland regions.

In conclusion, cautious buyers, price aware vendors and regionally frustrating seasonal conditions will lead to a very interesting second half of autumn. A return to wet conditions and much of the buyer caution will be washed away rewarding the patience and expectations for vendors. Alternatively, more of the recent mild conditions and vendors may start to lower expectations, luring buyers back into the market before the frosts and cooler days arrive through the south.