Fundamentals for recovery sound, just add water

James Nason, 13/08/2013

With solid fundamentals underpinning export demand, and forecasts pointing to a wetter than average spring and summer ahead, the signs for a much-needed market recovery in coming months are looking better than current sentiment may suggest.

The one missing ingredient, as is often the case, is rain.

In a five month period Queensland has gone from having no official drought declarations to having more than 50 percent of its land area officially drought-declared.

Until a widespread sasonal break is received, the constant threat of oversupply through forced cattle turnoffs is set to continue dominating the market. 

John Malone at Landmark Dalby said some western areas of the State, including limited patches around Charleville and back in towards Mitchell, had received some better falls in recent weeks, while areas from Chincilla east were still faring relatively well.

However, most of the west continued to endure tough conditions, with very plain and light cattle still coming out of that region.

Drought in the north was also extending its reach to the south and east, now putting pressure on areas that had helped to absorb turnoff from drought-stricken regions earlier this year.

“That real tough season that has been up in the Julia Creek and Cloncurry and through there is starting to creep south towards Clermont and likewise back in the Longreach and Blackall areas,” Mr Malone explained.

“There would be a lot of people up there that would be out of suitable feed for cattle.

“They have been selling down and selling down, a lot would be out of those heavier cattle and would be starting to struggle for weight and age.”

Further south seasonal conditions are somewhat more positive after many areas of New South Wales received above average rainfall in July.

Falls of 50-100mm across much of the State, with the notable exception of the parched north west, has improved the outlook for pasture, crop growth and livestock condition, according to the NSW DPI.

Inverell livestock agent Bob Jamieson said conditions gradually improved from western to eastern parts of northern New South Wales, but more rain was needed.

“Obviously it is very dry in the far west, such as Walgett, and they are going to need the same break that Queensland needs to make any real difference,” Mr Jamieson said.

“As we come further east the country around Moree is really quite good, the crops are good, but coming into the warmer times they are looking for the break as well.

“And over in our country (Inverell), we have probably had the mildest winter we have had for six to eight years.

“So whilst it has been dry, we got a good early break, and the oats crops for the first and second feed have been really been quite good, but they are starting to go off the boil now and we also really need the break that has been forecast.”

Mr Jamieson said that with high sea surface temperatures around Australia underpinning favourable forecasts for spring and summer rainfall, there was reason for optimism ahead.

“We think the break is going to happen, and we are telling our livestock clients to just hold off as long as they possibly can in selling, because we think this market is going to turn quite dramatically and quite quickly.

“If you look at where things are with world beef markets, it wants to be very, very good, but it just doesn’t have to be at the moment because of the cattle that are still coming out of the north and west.”

Mr Jamieson said it was interesting to note that just 10pc of the yarding at today’s Inverell cattle sale were prime cattle, which compared to 40-60pc of the yarding in normal times.

“That gives a real indication of where we’re heading to quite quickly,” he said.

“The first thing that moves in a market are the animals that there is the biggest scarcity of and greatest requirement for, and at the moment that  is domestic feeder steers.

“Everyone would like to see them around $2 a kilo.

"A month ago they were a $1.65, but we had feeder steers here today make up to up to $2.05, to $2.08, that is the point of the arrow, the first area to really start to move.”


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