A fortnight ago, in this column, aptly (partly) titled “Rain rules the roost” I discussed the impacts of what forecast or actual rain can do for producer confidence and subsequently market and pricing performance.
Since that time, the focus of rainfall has moved north, into northern NSW & large tracts of Queensland, which have experienced a challenging, well below average year in terms of rain. Rain totals, dependent on location, have ranged from 10 – 150mm +, but totals aside, the timing of this rain is just as important as the amount.
Figure 1. Weekly rainfall to Monday 19th October (Source: BOM)
Figure 1 above, weekly rainfall reported by the Bureau of Meteorology (BOM) provides this evidence of the widespread nature of the system that has delivered in the regions that needed it.
Cattle prices in eastern Australia have traded sharply higher post these weather events – all categories, but restocker types in particular.
This upcycle began late in 1st week of October, before properly formalising this week. To quantify that upcycle, spot prices this week have moved above 4-, 12- & 52-week moving averages for feeder steers and restocker steers and heifers, a potential sign of an upcycle materialising.
Leading into early November, I hold the view that market prices may continue to see upside in spot values, particularly when coupled with the favourable weather forecast for regions north of Dubbo into early November.
Heifers could potentially benefit the most, across both feeders and restockers, after being oversold in the previous downcycle which ended in the early days of this month. Last Friday’s AuctionsPlus sale results for heifers acknowledged this theme.
For feeder cattle, in the south, higher supply is continuing to weigh on a significant rise in pricing. Producers are seeing cattle reach weights quickly and are encouraged to sell before the top weights go over grid specifications. In addition to this, with a generally favourable season for most of the south, the intent or encouragement is there to step back into the market for a summer trade, lightening off heavier feeders will preserve a pasture base to allow this to happen (lighter cattle consume less dry matter than a heavier animal).
In the north, the theme I’m monitoring is feedlot demand for spot cattle, including the potential effect of forward purchasing activity undertaken over recent months to hedge against the exact type of market we’re experiencing now.
In addition to more forward bought cattle, feedlots may consider lengthening days on feed to reduce the number of cattle needed to replacement marketings. Both of these strategies are employed in markets like this one to assist feedlotting business’ hedge against upside moves in price.
The widespread nature of this recent rain event in regions that needed it has encouraged grass fever behaviour from producers.
Restocker steers and heifers & feeder steers have all moved above moving averages – a potential sign of an upswing in market pricing.
Feedlot participation in northern markets will be a key theme to monitor as several have larger numbers of forward bought cattle.
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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