The Australian cattle market has experienced extraordinary fluctuations in the past three years. From severe drought in 2019 to drought-breaking rains in 2020, the EYCI soared 59% (284c) in just three months, from 482c/kg cwt at the end of 2019, to 766c/kg cwt in March 2020. From there, seemingly endless rain has propelled the national herd rebuild, with the seemingly inexhaustible demand from restockers pushing prices to a peak of 1,191c/kg cwt in January 2022 – an astonishing rise of a further 55% (425c) from March 2020
The market appeared steady just below the peak levels into mid-2022, before the uncertainty surrounding FMD and LSD replaced confidence with concern and sent the EYCI tumbling to 887c/kg cwt in July 2022 – a 25% (304c) decline from the peak in January. The market has now recovered most of the June and July declines and has been relatively steady in recent days, finishing at 1,038c/kg cwt on Tuesday 13th September. Context is everything, and although the EYCI has eased by 13% (153c) so far in 2022 (Figure 1), it is important to note that current prices are higher than this time last year - when many thought the level would be unsustainable. Here we are a year later, and the cattle market is showing its strength with the EYCI averaging 1,071c/kg cwt.
Producers who bought back in January may still be nervous (although not as worried as in June and July) and wondering what the current prices and trend mean for the value of their livestock. Prices have come down off the peak, but still very high in historical terms and the added value of livestock through breeding, or weight gain has likely outpaced the fall in prices.
An animal of the exact same category, weight and age would be worth more in January than it would be in September. But if you bought an animal back in January, grew it out, or joined it, plenty of value would still have been derived over the period.
For example, using average weekly prices from AuctionsPlus commercial cattle sales, a 250kg weaned steer purchased for $1,883/head on Friday 28th January, gaining 0.8kg a day on average, would weigh 430kg on Friday 9th September and would be worth approximately $2,485. A PTIC heifer purchased at the same time for $3,082 and calved down in the Autumn, is now worth $3,993 with a calf-at-foot. Or an unjoined 280-330kg heifer purchased for $2,022 and joined and sold as PTIC is now worth $2,572. Therefore, despite lower spot prices from the start of the year, producers can still make a good return on stock by value-adding.
Given the average level of prices so far in 2022, demonstrated by the trend line in figure 1, it’s easy to see why supply was drastically lower during July and August. A discount of 150c/kg cwt is unappealing to say the least, particularly when feed in the paddock allows you to hold livestock for longer. As a result, there is expected to be a huge number of cattle on-farm ready to hit the market once vendors deem prices to be acceptable.
If the last two years are a guide, the competition from buyers should again be ferocious, leaving a smile again on vendors heading into the final months of the year.