Whether it was a flash in the pan or a genuine light at the end of the tunnel remains to be seen, but yesterday’s sharp drop in the value of the Australian dollar injected some short-term confidence into the feeder cattle market.
The Australian dollar temporarily fell below parity with the US greenback yesterday before rising to 102.25c yesterday.
In a sign that a weaker dollar may have been short-lived, the $A opened another one cent stronger this morning at 103.52 following an overnight improvement in the US stock market, which recorded its biggest daily jump in two years.
After shedding 635 points on Monday – the sixth-biggest point drop in its history – the Dow Jones index regained 430 points last night to close at 11239.77 this morning.
The Australian dollar moved almost 4c in one day yesterday, underlining the uncertain mood that is dominating global markets following Monday's sharemarket carnage.
The $A's sudden slide to below parity provided a least some short-term optimism that the export outlook may be improving, which saw feedlot buyers at their most active in weeks.
Feeder steer and heifer categories rose across most NLRS-reported cattle sales yesterday.
Heavier steers to feed at Roma were quoted 5c/kg dearer while yearling heifers were firm to slightly dearer.
Further south at Gunnedah heavier steers for feedlots attracted stronger demand from regular buyers, according to the NLRS, resulting in a dearer trend for a plainer quality offering.
The NSW Central Tablelands Livestock Exchange near Blayney saw yearling steers to feed quoted as firm while heavier weights and yearling heifers to feedlot buyers were around 5c dearer.
The 10c drop in the value of the dollar that occurred between August 1 and yesterday represents a 10pc differential in potential export returns.
A 5-10c increase in rates for many categories by major processors JBS Australia and Teys Brothers on Monday reflected the more favourable currency movement and a move to increase kill rates.
Jason Shearer Smith from Smithfield Feedlot near Proston bought three decks of cattle out of Roma yesterday, and said the currency’s drop to below parity had been a source of optimism.
“We’re a lot more hopeful at a currency of 101c than at 110c,” he said.
Processors increasing their kill rates and optimism that currency movements would benefit forward prices were key factors behind the increased activity for heavier feeder cattle yesterday, he believed.
“And the feedlots have just been starved for cattle, there are not enough in the market to go around,” he said.
Mr Shearer-Smith said the 12c movement that had occurred in the value of the Australian dollar in the last five trading sessions meant it was impossible to know where the currency will move next.
"We could see the dollar back to 108c in four days time and then we're all back to where we were."
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