Markets

Chris Howie’s southern sales wrap: Options aplenty as market runs hot

Chris Howie , January 14, 2021

Prominent livestock marketing identity Chris Howie offers his insights on market trends and opportunities ahead for Beef Central and Sheep Central readers, drawing from his own observations and an extensive network of producers, agents, processors and industry associates developed during his extensive career as a livestock agent. Chris is Stockco’s Business Development Manager.

Snapshot:

  • Heifers become the new pace setters
  • Black baldies take weight for age price ribbon
  • New orders counter lack of Russian export demand
  • Large branded supply chains and producers buying to replace bullocks at core of competition
  • Demand pushes non-EU cattle up to EU premium rates
  • Some processor managed feedlots notable absentees from buying gallery this year
  • Emergence of online nterface with auction sales coming of age in COVID era
  • Significant funding enquiry for PTIC females or holding heifers and ewe lambs for post drought rebuild
  • Options to consider

 

HAPPY New Year. Well the rain appeared in the north with the New England looking exceptional and Queensland receiving the rain all had hoped for.

After covering the sales pre–Xmas I was keen to see how the early January sales would open.

Considering the prices then it was difficult to say they would go any higher.

I am happy to say I was wrong.

I had provided my thoughts to those that asked, stating that $4.50 would be needed to get a start but I was nowhere near the prices achieved.

As you can see the market found a new level with 380kg+ steers constant around $4.80, 350kg models $5.00 – $5.25, 300kg $5.25 – $5.70 and the 250kg models anything from $5.60 to $6.62.

Heifers following on a week later have really become the new pace setters with stylish heifers consistently starting at $5.00 as future breeders.

Price separation on breed was non-existent, however, if I was to pick the weight for age and price winner, I suggest the black baldies took the ribbon.

Several orders appeared in January that were not present in December and as suggested earlier the Russian export order did not operate this year.

The market took a significant lift of between 40–80 cents per kilo on similar cattle across all types.

Monday and Tuesday of the first week phones ran hot to see who was pushing the market but in the long run anticipated supply shortage leading into winter and northern rain seem to be the drivers.

Analysing the orders operating soon pared back to 6 or 7 significant buyers who were securing supply for their existing supply arrangements. Many of these cattle will go into branded grass or grain supply chains and the principles have long standing relationships which are not only reliant on supply but also securing a contract position prior to purchase.

Looking from outside it is apparent those buying to replace bullocks sold are now competing directly with these supply chain orders. This form of activity means we have two completely different end users paying the same money – one driven by supply needs, the other by availability of grass. Highlighting this was the difference between EU and non-EU cattle. I had several conversations with EU producers feeling they did not receive a premium for being EU. I disagreed with them; they definitely received their premium however the non-EU buyers pushed the non-EU cattle up to the same level therefore reducing the spread normally seen.

It is easy to speak about those buying but I can assure you all quite a few significant grass orders from NSW went home empty handed. Not because the cattle didn’t suit but because they could not make the purchase price + freight numbers work into eventual sale result.

Noticeably absent from the buying gallery were a few processor managed feedlots. Several informal chats with buyers all followed the same thread – current auction prices have no correlation to the prices being received for processed meat. Especially with the volumes being seen out of the US and South America and the rising Aussie dollar. Other major buyers who operated are looking to utilise grass availability to lift cattle weights before feedlot entry – therefore softening the price in what looks to be an extended period of short feeder supply.

COVID forcing industry to evolve – The emergence of the electronic platform interface with auction sales has really come of age. I remember doing the first one with A+ at the Inverell sale yards in 2003. A lot of work for no result. Now you would not even consider leaving this marketing tool out – especially for the upcoming joined female sales. Auction plus has continued to evolve from its CALM days but now acceptance of this marketing method has seen the arrival of several other platforms. This example from Barnawartha is proof; “online bidding platform was highly active throughout the sale with 47% of sale bid on, 20% of the sale sold online & 61% of the heifers sold online.” The pudding has been well and truly proven I suggest. One word of warning though when buying remotely – buyer beware as it seemed some of the prices paid exceeded the quality of the lots on offer in the lighter cattle.

Funding and flexibility to utilise feed – During my day job with StockCo we have been receiving a significant amount of enquiry about funding PTIC females or holding heifers and ewe lambs back as part of the post drought rebuild. Providing working capital or funding solutions for this enquiry not only allows producers and buyers to conduct business but is helping agencies manage the significant vendor and buyer invoices for clients who are looking for extended payment terms. With low interest rates and grass we are also seeing increased activity with properties purchased and livestock facilities required to stock the property.

Options to consider

With current prices I think there are several options that can be considered:

  • Sell to capture market and wait before buying cattle in
  • Maximise your existing stock by using a cash advance to meet financial requirements and making best use of your available feed.
    • Retain heifers and ewe lambs to rebuild herd or flock – North, South and West
    • Grow out your steers and lambs to heavier weights.
    • Investigating custom feeding options with lower ration prices – especially lambs leading into May – July
  • Grab some lambs and carry them on good feed into the winter supply window!

Last of all registering yourself for the various grass/pasture assurance programs is a no brainer. The same with EU registration – you’re already have the LPA compliance so upgrade for little extra work.

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Comments

  1. Andrew Street, January 15, 2021

    Chris,
    Thanks for your informative comments and forward thinking strategies.

    Regarding EU accreditation, I have recently relinquished our EU status because I found buying EU cattle post drought and fires a restrictive process due to lack of numbers and as you point out in hot/ short supply markets spreads to premium products collapse. So in short I couldn’t buy cattle and they’re selling for the same sell price.

    I plan to go back to the EU program and can see the benefits with a possible China problem, but isn’t the problem often that the EU buys very little of our beef and until they do feedlots and processors are only buying EU “just in case”?

    Kind Regards

    Andrew

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