Restockers benched but weaner premium holds

Restockers benched but weaner premium holds


Beef
ON OFFER: The action at the Hamilton Independent Agents Angus steer sale in Victoria  last week where 3585 were penned.   PHOTO: Murray Arnel.

ON OFFER: The action at the Hamilton Independent Agents Angus steer sale in Victoria last week where 3585 were penned. PHOTO: Murray Arnel.

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Fears 2019 cattle shortage will be severe.

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WITH restockers benched across the vast majority of Australia’s cattle growing regions due to ongoing hot and dry conditions, the solid premium for weaners recorded in the south so far is unlikely to hold for long.

The other emerging dynamic is the likelihood of a severe shortage of finished cattle later this year, which analysts say could prompt some tough decisions down the track about which beef export markets should be protected first.

The weaner premium over the Eastern Young Cattle Indicator is currently around 9.5 per cent.

Mecardo’s Matt Dalgleish said that was the strongest of this decade’s dry times. It dropped to as little as 5pc in the 2014/15 drought.

The live export game and rain-blessed Tasmanian and South Australian buyers provided demand across opening Victorian weaner sales where northern customers were absent.

That has fuelled talk of a significant supply gap come winter, with these numbers lost to the system exacerbating the effects of the stalled herd rebuild.

The short period of good times during 2017, where the weaner premium hit 17pc, was not enough to get the rebuild underway in earnest.  

Strong cattle-on-feed numbers could be a salvaging point, but that would depend heavily on an autumn break, Mr Dalgleish said.

The Bureau of Meteorology’s first three-month outlook for 2019 is due this week, however global forecast models are suggesting warmer and drier conditions to persist for much of the country.

The hoped-for big early wet in the north hasn’t eventuated but the Territory could still record a reasonable-to-good season overall, Rabobank’s Angus Gidley-Baird said.

This time around Western Australia is looking dry too, unlike last year.

The Bureau of Meteorology’s just-released annual climate statement shows 2018 was Australia's third-warmest year on record, while rainfall totals were the lowest since 2005.

The only part of the country to buck the trend for above-average temperatures was the Kimberley region, which had cooler-than-average nights for the year.

Nationally, Australia's 2018 rainfall total was 11 per cent below the 1961-to-1990 average but many areas were significantly below average.

Meat and Livestock Australia’s market intelligence manager Scott Tolmie said what rebuild did occur was fast being undone.

Producers were also much closer to making the decision to offload now than they were this time last year, with feedstock supplies far less substantial, he said.

The question which would most affect the market was how much culling had already occurred, Mr Gidley-Baird said.

“Many people have already got rid of surplus cattle, so it’s unlikely there will be any mad flush of cattle onto the market,” he said.

“We are now eating into breeding herds and those are very hard decisions to make on farm.”

Queensland agent Matthew Grayson, George and Fuhrmann at Warwick, said the feedback he was hearing was people won’t try to feed cattle again because of the cost and difficulty in sourcing.

While the specialist weaner producers who target autumn sales in northern NSW and southern Queensland had not yet started offloading early, it would not be far off if rain didn’t arrive soon, he said.

For those in a position to purchase at the moment, returns from backgrounding or growing steers out could be described as good to very good, according to Mecardo’s Angus Brown.

Heifers in particular were worth considering, he said.

“They are much cheaper in dollars per head, especially for those who are looking to finish cattle and sell to processors. Additionally, if we do see a good rain, breeding stock are going to be in strong demand and there will be plenty of upside in females,” he said.

Mr Dalgleish said another failed autumn in the south would make finished cattle very scarce.

And there is only so long Australia can keep destocking - if overseas demand continues to grow we will have to be more selective about where we send beef product to, he said.

Those type of decisions are unlikely to be required this year but it’s the track we are on right now, he said.

Of course, widespread soaking rain would see the market turn very quickly, however most analysts believe prices won’t return to the peaks of this decade.

Heavy United States supply was one factor that would take some sting out of the price able to be achieved at the end, they said.

Mecardo believes the EYCI could reach 650 cents per kilogram carcase weight when rains arrive. It’s currently at 502.75c/kg, down 53c on this time last year.

The story Restockers benched but weaner premium holds first appeared on Farm Online.

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