The Eastern Young Cattle Indicator broke through 1000 cents a kilogram last week, but despite prices reaching eye-watering territory, agriculture consultant John Francis, Agrista, says it may not be too late for restockers to jump into the market.
Whether to restock or not in a sky-high market has been a question which has plagued producers since the drought broke last year.
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Mr Francis, who is a keynote speaker at the Graham Centre Livestock Forum on Friday, said when making these decisions producers need to be aware of their natural biases and focus on the information that is available to them - from feed budgeting to market analysis.
"We're always going to face uncertainty so how do we turn that uncertainty into useful information," Mr Francis said.
The Wagga Wagga-based consultant said that producers need to first differentiate between the decision and the outcome.
"People who decided to sell everything during the drought can't say 'I made a bad decision because the market's gone sky high' - that's assessing the outcome, which really comes down to luck," he said.
"Whether you made a good decision comes down to whether you moved yourself from a position from no information to as much information as you can get."
Natural human biases distort decisions
Mr Francis said a natural human bias was that we value potential gain half as much as we fear loss.
"There's also the ambiguity effect, that's where we avoid options which appear to have missing information.
"That might mean a lower-value option is taken in preference to an uncertain option."
However, the lower value option, Mr Francis argues, is one producers should avoid.
"People who are still under-stocked have chosen to stay at 60 to 70 per cent of their optimum levels because they know what they're getting," he said.
"But they've missed out on some pretty big opportunities over the last two years.
"Sure they were gun-shy having been through a really traumatic time, but if you think about the factors - in 2020 the break was as good as it got, through winter it still kept raining, it was mild, we've never had pasture growth rates as high.
"Even if it wasn't a rising market I would suggest you're still better off being in than sitting on the sidelines.
"The only way you can maintain a high level of productivity and profitability is to continue to use that feed, if you waste it there's an opportunity cost - the production forgone."
Don't assume market is too high, do the sums
As for assessing whether the market is going to hold at such historically high prices, Mr Francis believed producers must take a position based on the information they have - from analysts who assess macro trends like the demand for protein and stage of the herd rebuild, to people on the ground like agents, feedlots and processors.
"Pregnancy-tested-in-calf cows are being sold for $2500 per head. Do you think the market will stay at $2500 in the future?," Mr Francis posed.
"If you think it's going to increase this information should support your position to get in.
"But if you think it's going to decrease you have to think about how much it's going to decrease by.
"On current prices and with trade cattle at 450c/kg a PTIC cow trade can generate a return of around 20 per cent.
"Even if market prices decrease by 15pc you can still make money out of a PTIC cow trade at the moment."
He acknowledged that a PTIC cow was a higher cash cost which not everyone could withstand, but said breeding up also involved a cash cost because you were holding on to your females.
"Part of the value of that PTIC cow is the growth of your balance sheet, or that you have an asset on hand," Mr Francis said.
Mr Francis said no matter your view of the market outlook, what was important was that you did the sums.
"I don't think some people have done them, they've just said 'it's too high'", he said.
"The reason they've thought that is the anchoring effect, which is another bias.
"They think 'previously cows were only worth $1000 per head, how could they possibly be worth $2500 now?'
"But if you look at steers, which were previously worth $1000 per head, and are now worth in excess of $2000, it starts to make sense."
Feed budgeting crucial
The other calculation producers should make before entering the saleyards is feed availability.
Mr Francis said although most of the state is experiencing another wet winter, the pasture growth rate is markedly different to last year.
"April to July cumulatively, our pasture growth is sitting in the lowest 10 per cent of years, compared to last year where we were in the highest 10pc," he said.
"We're 500kg/ha down relative to average and 1000kg/ha down on last year.
"Therefore those people who have carried stock through are having to tactically manage the far lower growth rate.
"One option is to exit something and one is to grow more feed, through gibberellic acid and urea."
"Many are trying to grow more feed, they know we only have 35 days of winter left and as soon as they're out the other side they're going to be right."
Mr Francis said again the key here was information - regular monitoring of pasture growth allowing producers to make good decisions, no matter the outcome.
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