It’s the Year of the Ox in 2021 and it’s shaping up to be a lucky one for cattle producers who have plenty of grass and plenty of stock.
The Eastern Young Cattle Indicator (EYCI), which is the cattle industry’s key market indicator, hit an all-time high, and a very lucky number of 888 cents a kilogram last month, which was up more than 300c/kg on the same period last year.
The money being forked out for young cattle is extraordinary.
At Dalby in Queensland this week, young steers straight off their mothers and weighing just 133kg, fetched $7.64/kg live-weight, or just over $1,000 a head.
This is great news for sellers, but spare a thought for those looking to buy, including producers trying to get back into the cattle game after years of drought.
Processors and consumers are also feeling the pain of record high prices.
How high can prices go?
A growing number of analysts believe the market is way too hot and there is a price correction on its way.
Independent analyst Simon Quilty felt the market had potentially reached its peak.
“If you look at the meat processors, they continue to lose significant amounts of money, their losses are around $300 to $350 a head on cows and [they are] losing $250 to $300 a head on heavy steers — that’s unsustainable,” he told ABC Rural.
“We might see a 17 per cent fall, but then a 5 to 7 per cent correction, and then the market will probably move sideways for a good six months.”
NAB senior agribusiness economist Phin Ziebell said the EYCI falling to about 600c/kg this year was “not out of the question”.
“The fundamentals globally don’t support a EYCI that’s well north of 800c/kg. That’s huge and has been driven by restocker interest because of improved rainfall conditions with this La Nina.
“We’ve had a really good run and a lot of people would be very happy about where the cattle industry is sitting at the moment.
“But any risk-management assessment at an industry-wide level would say, ‘Be prepared for declining prices’, because all things being equal, that’s what’s likely to occur.”
Hot live export prices causing pain in Indonesia
In Australia’s far north, the live export trade has also hit never-before-seen prices, with Northern Territory cattle producers getting about $4.10/kg for feeder steers out of Darwin bound for Indonesia.
ABC Rural spoke to an agent this week who is paying up to $4.30/kg.
“It’s top-of-the-tree money, there’s no doubt about that,” said Scott Riggs from Top End Livestock.
“At this time of the year during the wet season it’s not unusual to have high prices, but these prices have never been seen before.”
He said demand from Indonesia was high, as feedlots looked to lock in cattle ahead of Ramadan, but he felt once the religious period was over, prices would ease.
“I would think people who can get their cattle in between now and mid-March will get very good money, but there could be a correction in the market by end of March, only due to [Indonesian] feedlots being full and they’ll be concentrating on getting stock fat for Ramadan and Lebaran,” he said.
The prices are causing a lot of pain in Indonesia, with meat sellers in Jakarta going on strike and the Government now considering imports from Mexico.
Indonesian Feedlot Association chairman Didiek Purwanto said the price of live cattle from Australia was no longer sustainable and several feedlots had gone out of business.
Meatworks cutting jobs
The high cattle prices are putting a lot of pressure on abattoirs around the nation, and according to Mr Quilty, are unsustainable.
In central Victoria earlier this month, Greenham and Sons made the decision to close part of its processing plant in Tongala.
“Some recent factors such as the impact of coronavirus on meat markets across the globe and the exit of many dairy farms in the region have caused the export manufacturing beef business at Tongala to become uncompetitive,” said Greenham’s general manager of operations Tom Maguire.
Further south, Tasmanian Red Meat Industry Steering Committee chairman Brett Hall said both the Longford and Smithton abattoirs had reduced their hours, and on some weeks were only processing for three days.
“Ideally we’d like to see [those abattoirs] going at a normal rate, but it’s a reflection of how good a season it’s been up the eastern part of Australia,” he told ABC Rural.
Mr Hall said abattoirs were definitely doing it tough and hoped it would only be a “short-term supply and demand issue”.
“Once we get back to a normal season in the rest of Australia, we’ll probably get a situation where there’s less demand from restockers and the market should level out a bit.”
Herd rebuild underway
After years of severe drought, Australia’s cattle herd fell to 24.6 million head in 2020 — its lowest level since the early 1990s and one of the key factors behind the current record prices.
According to Meat and Livestock Australia (MLA), the national herd is now starting to rebuild and is on track to rise by 2 per cent in 2021.
MLA is also predicting more pain ahead for processors, with cattle slaughter numbers set to fall to their lowest level in 25 years as producers hold onto stock.
“Producer preferences to hold onto young cattle rather than turn them off into the vealer market is already evident,” said MLA’s Stephen Bignell.
“During the first few weeks of 2021, yardings and slaughter numbers have been down on year-ago levels.
“As the rebuild gains momentum on the assumption of above-median rainfall for the start of 2021, total adult-cattle slaughter is forecast to fall 3 per cent on 2020 levels, to hit 6.9 million head, the lowest in 25 years.”
Article credit – www.abc.net.au