IT’S not official, but we are almost on top of the world.
Australia is achieving among the worlds highest beef prices, in Australian dollar terms, we are just a touch behind the US in global heavy steer value, and our 90CL grinding beef (cow) in America is actually making more than the local US product.
Domestically, we have trashed the old Eastern Young Cattle Indicator (EYCI) (young steer) record by a mile.
All is good, but before we congratulate ourselves and step up to the podium to accept the gold medal, we should ask....
How has this happened, how long will it last, and how do we benefit long term?
Beef , like any perishable product, is wholly dependent on supply and demand cycles.
Marketing, quality, currencies, disease and weather influence the graph, but basically it is just a supply cycle, dependent on demand.
Therefore the world and Australian beef markets are quite predictable.
Looking at the first question, how has it happened, how have we achieved this “all time best beef prices” boom?
Our graziers have been the fortunate recipients of a “perfect storm” of low Aussie beef numbers, widespread rainfall over eastern Australia and the traditional winter market shortage periods of July/August all happening at the same time.
Our beef numbers are at 30-year lows after many years of drought.
During the past few years, our graziers have endured forced sales with cow slaughter in particular at all time record highs at very low on farm prices.
It is interesting to note that world beef prices have been at extreme highs for a couple of years now, but our processors have been the happy recipients and not shared too much of the profits.
Unfortunately drought has forced the local grazier to sell at low prices during this period.
The forced record cow slaughter has lead to a sharp decline in our breeder numbers.
With the boot on the other foot, let's hope the processor has stored some of theses extreme profits in order to operate over this current high priced period.
In asking how long this record high will last, we should remember we are experiencing the best widespread rain in 20 years, and it is to coin a phrase "winter is coming".
Rain grows grass, and grass grows beef, and not much beef is prime or available in our winter months of July/August.
So we have identified the peak of the supply shortage, and therefore the peak of the price graph.
The key is to be not buying, but to be selling trade or feeder cattle on this market, unless you have the benefit of a forward contract.
Our agency business, BJA, historically does not buy a single beast unless it is forward contracted, so we will be active in this extreme market. It is not for everybody!
This extreme beef market is being driven by mud, grass and emotion, and it is temporary.
While the Australian beef numbers are at 30-year lows, the world's beef numbers are climbing out of the doldrums and are rising.
Guess what? We are major exporters, we export around 65 per cent of our production, so our price is eventually governed by the world price.
A wise man once told me, "no extreme boom, for any industry, lasts longer than three months".
Maybe my friend was right, maybe he was wrong, but I think about that statement all the time.
Finally, what to do about it.
If you have grass and time, feel free to buy a little steer and let your grass and increased weight gain cost your animal back.
It is very important, however, to know the price. I saw two lots of steers toward the end of the week, similar breeds, similar weights, but one lot made 360 cents a kilogram and the other made 420c/kg.
Similar cattle, one sold in a saleyard, and one on AuctionsPlus and an 60c/kg price differential (emotion...there is nothing more dangerous than a grazier with muddy boots).
This market will not crash, indeed it will not even drop quickly, but it is much too high.
I can, however, see steer trading budgets dropping into negative territory over the short term, then stabilising to be reasonable business.
The reason? Nobody actually knows the real price at the moment.
To me, one thing is very obvious.
The weaner producing grazier, has a very nice time ahead of them.
So, how do we benefit from this situation?
We have another two years of very low cattle numbers in Australia, and a very good chance of a La Nina weather system.
As I have said a couple of times before "own a cow, because the person that breeds the calf will win the race".
My advice?
Protect your females, and buy the best bulls you can afford, because the breeder wins.
Good times ahead, best of luck.
- Bob Jamieson is a member of Australian Livestock and Property Agents Association.
