Optimism Abounds for Cattle Prices to Remain High for Remainder of 2021

The first edition of “Paddock Wisdom” proved to be a great success, with over 2,000 responses. The survey was open for exactly seven days, with plenty of feedback from participants – covering everything on why they selected one-of-five options, through to future survey topics.

The results are as below:

Summary: Overwhelmingly, it appears respondents to “Paddock Wisdom” were very optimistic about the outlook for the young steer market for the next six months. Indeed, more than 4-out-of-5 respondents thought that the price would be at or above $1,488/head come the first week of December 2021. Why $1,488/head – as this equates to an EYCI of around 800c/kg cwt.

In context, the EYCI in the first week of December 2020 was hovering just below 790c/kg cwt, while the average for the week over the previous five-years (2016-2020) was just above 600c/kg cwt. So, 4-out-of-5 respondents replied that the market as at early December 2021 will at least be 33% higher than the previous five-year average and just above the corresponding period in 2020.

Undoubtably, the “optimism” in the market is underpinned by the largely positive seasonal conditions, favorable rainfall outlook and encouraging beef demand outlook for the medium term. Additionally, the outcome from the first edition of “Paddock Wisdom” also lines-up very well with the findings from the sentiment and outlook survey, “The Gavel”, which AuctionsPlus commissioned in late April 2021. From “The Gavel”, Australian livestock producers were much more optimistic than the general Australian population about their financial future over the next five years.

So, what about the 11.1% of respondents who replied that the market could be down between 10-25% by December 21? Or the 5.9% who felt a greater than 25% decline was on the cards? With a 25% decline, the EYCI would be at, or around, 670c/kg cwt in early December (see chart 2). Certainly, caution and a historical context to price expectation can be a very successful methodology to ensure long-term profitability, however, given the current market and season, it would appear as though the clearest path to a 10-25% price decline would be seasonally related. Maybe in this 2021 price scenario, the well-worn adage that “nothing cures high prices, like high prices”, would be better changed to “nothing cures high prices in 2021, like a poor finish to winter and failed spring”. Or maybe the 17% of respondents who replied with a substantially lower market by December 2021 are keen buyers, and are just signaling where they would like young steer prices to be?

Finally, given the one-week period of the survey, it was very interesting to see the proportional increase in A or B responses into the final few days for the survey – which corresponded to widespread rain through the eastern states. At the same time, the EYCI hit a new high of 913c/kg cwt.

The second edition of Paddock Wisdom will be available from Friday, 18th June – this time looking at the Australian lamb market and the expectations heading into 2021.