Beef needs prolonged highs for real benefit

Beef needs prolonged highs for real benefit


Opinion
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The Land says: In 2015 and into early 2016, whether or not the Eastern Young Cattle Indicator (EYCI) would hit 700 cents a kilogram (carcase weight) appeared to be more about the “ifs” than any other factors.

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IN 2015 and into early 2016, whether or not the Eastern Young Cattle Indicator (EYCI) would hit 700 cents a kilogram (carcase weight) appeared to be more about the “ifs” than any other factors, the prospect of it actually occurring being one of those predictions people tended to put in the “I’ll believe it when it happens” basket.

However, on Tuesday the EYCI smashed through the 700c/kg ceiling, hitting 709c/kg.

To give some context, on December 18, 2014, the EYCI was at just 376c/kg – it has risen 47 per cent in just 20 months. It had previously sat in the high 300s to low 400s for about four years.

The benefits of the high cattle prices will likely spill into markets such as sheep and lambs, as buyers look for affordable stock to make use of what is set to be a big spring flush. It is now becoming possible again for producers to put money back into their farms, including long overdue superphosphate spreading and expenditure on small items, helped by the immediate write-down of items below $20,000.

The break in the season and the strong cattle market has been timely, with wool having lifted mid year (auctions opened again yesterday) and lamb and sheep prices also remaining at solid levels.

Another positive is this price boom has arrived without a wet cyclone season, the northern drought being the main factor in 2014-15 that held the market back while the rest of the world enjoyed record high prices.

A wet summer in the north could make for interesting dynamics given where the market is coming into spring.

It was, after all, a wet summer across the north that analysts of the likes of Mecardo had repeatedly said was needed to crack the 700c/kg level. We haven’t seen a wet summer for a while, but we now have seen 700c/kg. This type of break is what the agriculture sector needs. The lamb industry has had good prices for a few years, but it is only now that producers are reaching a position where they have some confidence in their financial position, having paid down some debt or put money aside into catch-up capital expenditure from cash flow, or into farm management deposits.

Beef producers need a few good years on the trot as well. The market has not yet hit any major price ceilings at the retail end, however, now would be a good time to educate consumers why these price levels are so important and must be maintained.

Australians produce and eat the world’s best beef, let’s keep it that way.

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