Welcome rainfall over the past week across broad areas of southern Australia will only be beneficial and supportive of seasonal conditions and producer confidence. Evidence of the impact a rain event, or forecast for that matter, can have on markets has been reflected in recent pricing moves.
Across multiple selling channels, including AuctionsPlus, prices throughout the broader east improved, including in areas north of Dubbo where no rain fell at all. Why did this occur? Because when markets get desperate for rain, reactions to forecasts can intensify moves in pricing, and in this instance the market reacted positively to the forecast of rain and prices responded accordingly.
The overall impact of that move is heightened levels of price volatility and the inherent risk associated with the emotive nature of cattle markets which is now commonplace in Australia.
The risk of price volatility can without doubt also become a powerful tool of opportunity and for many, it is used that way to create a competitive advantage when trading livestock.
Though the point to highlight here, is that price volatility has intensified in a short amount of time despite fundamentals for the sector not actually changing. That instability in pricing is creating risk and it suggests that despite solid longer-term optimistic fundamentals some fragility remains prominent across the marketplace.
Acknowledged by how sharply the market has moved and or changed in the areas which haven’t received any rain.. that type of reaction has lifted prices but importantly, the question can be asked, if dry weather returns in northern Australia, does the marketplace adjust the other way?
What we’re seeing in market moves, is an emotive, positive reaction to weather, which has improved confidence. The truth is, market fundamentals for the outlook hadn’t changed over the three weeks prior, yet prices eased sharply … it was just that confidence disappeared as the outlook from a seasonal perspective deteriorated.
The reverse is what we’re seeing now and this is particularly relevant for market performance north of Dubbo last week, despite no rain actually falling in those regions.
In addition, I believe that the set up for further levels of price volatility is well and truly in play as we move towards the end of the year. The back end of October into November, with rainfall likely to further generate sharp moves in pricing and thus, this volatility to continue.
Beyond the back end of this year, to me it doesn’t feel like the market has priced in dry weather in 2027. A consideration to monitor as rainfall or a forecast will continue to dictate market pricing, without considering a longer term view.
No clearer reminder of weather and producer confidence dictating market performance can be seen than in the past week with prices improving despite little to no rain north of Dubbo.
Pricing moves and volatility has increased on the back of this – creating renewed risk across the supply chain.
It doesn’t feel as if the market has priced in dry weather in 2027 – its risk on attitude at the minute and that may intensify when rain does fall.
Ripley Atkinson's experience in the red meat industry and current role at StoneX developing price risk management tools for Australia’s sheep and cattle sectors ensures he delivers unique, whole of supply chain insights and analysis across key factors such as prices, supply, production and the drivers of the sheep and cattle cycles.
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