FY20 A Tale of Two Seasons

The 2019-2020 financial year has taken the cattle and sheep market on a rollercoaster ride from extreme lows to exciting highs. Last year, no one could have imagined where the market would be in just 12 months. Rain seemed a distant dream as the drought tightened its grip over much of the eastern seaboard, contributing to a catastrophic fire season.

However, the turn of the calendar saw many regions receive long-overdue rain, as illustrated in figure 1. The downpours were extensive enough to cause what many have called “grass fever” and steered the store market into uncharted territories. The diminished national herd and flock, combined with demand at an all-time high, drove livestock prices through the roof. The COVID-19 pandemic highlighted the momentum and resilience of the store market as supply and demand factors prevailed when the country went into lockdown.

As the FY20 financial diaries have now been closed, the AuctionsPlus Market Insights team has delved into our data to track the cattle and sheep markets whilst these unprecedented events unfolded. AuctionsPlus finished the financial year with 632,887 head of cattle and 3,820,434 head of sheep listed online, an astonishing 62% and 24% increase on FY19, respectively.

The prolonged dry conditions correlate with the regions that offered the most stock online. Between July and December 2019, the largest listing region for cattle was the Northern Tablelands of NSW, offering 44,000 head, followed by the Southern QLD (32,000) and N.W. Slopes & Plains of NSW (31,000). The Bureau of Meteorology (BOM) reported that the rainfall deficiencies since early 2017 were most extreme in those regions.

While the major players listing sheep for FY20 were the Central West and Riverina regions of NSW, and the South West of Victoria, offering 673,000, 371,000 and 421,000 head, respectively. Another significant contributing region was Western Australia, with the southern areas of the state offering 222,000 sheep online on AuctionsPlus. Again, these regions experienced chronic drought conditions for most of 2019 and some even into 2020, such as southern Western Australia.

Purchasing has been driven by restocking demand from regions that received above average rainfall at the beginning of 2020. Cattle buyers from Southern QLD, the NW Slopes & Plains and Central Western NSW dominated purchases for the financial year, between them they bought 42% of cattle sold. These three regions had significantly depleted herds and sought to rebuild numbers with the positive turn in season. They each predominantly sought steers and heifers, however, they also bought large numbers of breeders. Southern QLD, for example, was the biggest purchaser of PTIC heifers with 2,700 head returning to the region out of the 23,300 head sold online.

On the sheep front, as well as being a major seller, the Central West NSW was also a major buyer, purchasing 18% of sheep sold on the system, followed by the Riverina NSW (16%), South West VIC (9%) and Northern VIC (7%). As supply tightened and growers struggled to find large lines of breeding ewes to restock paddocks, they looked westward. This saw 76% (108,000) of sheep sold online from WA travel east to buyers in NSW, VIC and SA.

Cattle and sheep prices spiked soon after rain hit the gauges which drove the FY average upwards for all stock categories. Furthermore, there was not only a significant jump from FY19 to FY20, there was also a leap in prices from the last six months of 2019 to the first six months of 2020, as demonstrated in figure 2. Cows with Calves at Foot (CAF) rose $370 from $1,245 to $1,616 on average from FY19 to FY20. The $758 jump from $1,285 in December 2019 to $2,043 in June 2020, contributed to the strong FY20 prices. PTIC heifer prices soared in FY20, up $677 from FY19 to average $1,743 and within the 12 months they climbed $568 from $1,149 in December 2019 to $1,717 in June 2020.

It is not only breeding articles that followed this market trend - weaner and grown steers and heifers were also swept up in the increased restocking demand since Jan 2020. Weaner steers averaged 468c between Jan-Jun 2020 to raise the yearly average to 394c, 100c dearer than FY19. Weaner heifers increased 110c as they averaged 356c for FY20, largely driven by the Jan-Jun spike in prices where they sold for 427c, seeing a YOY growth of 83%, illustrated in Figure 3 below.

Sheep buyers fell into two categories of purchasing. The first being crossbred wether and mixed sex lambs or Merino wether lambs to put into paddocks full of feed for a quick return; or purchasing joined or unjoined ewes for longer term endeavours. Figure 4 below highlights the immediate growth the market saw at the turn of the new calendar. The average price paid for crossbred store lambs rose $11 (from $122 to $133) and Scanned in Lamb (SIL) Merino ewes rose $43 (from $180 to $223).

YOY growth, below in Figure 5, of various stock categories presents an insight into sheep grower’s longer-term plans. SIL first cross Border Leicester/Merino ewes and SIL Merino ewes have increased 48% and 51%; while unjoined Border Leicester/Merino and Merino ewes have only grown 27% and 36% respectively; illustrating the importance of having lambs on the ground come Spring. Even more affordable categories such as Merino wether lambs have seen strong interest, seeing a YOY growth of 43%, highlighting the general demand for sheep.

The 2020 financial year has seen the cattle and sheep market rise from its knees in the grip of drought to the record highs following replenishing rain. A unique combination of the lowest national herd numbers in history, a wet start to 2020 fuelling restocking demand and a world-wide pandemic has seen prices skyrocket to new levels. Since the spike in prices, there has not been a major market retraction; store prices have held firm across the last few months of FY20, as grower confidence remains high. Heading into FY21, there is no clear signal that the market will take much of a backwards step while the country continues to restock and rebuild numbers.