With a traditionally high turnoff period approaching, the next three months will pose some interesting questions and challenges for cattle markets, Meat and Livestock Australia says.

While Australian dollar movements will continue to have a strong influence, supply factors are gaining in prominence.

“The largest questions being posed surround the anticipated supply of cattle heading into the traditionally higher turnoff months of May and June,” MLA said this week.

After the two wettest years on record across Australia’s key cattle producing regions, the trend towards herd rebuilding is expected to result in increased supplies coming forward in the second quarter of 2012.

The flow of supply could be greater as cattle that were delayed from sale by wet weather in the first quarter are also added to the mix.

MLA notes that throughput numbers are always higher in the second quarter than the first quarter – by 11pc on average over the past 10 years in fact – as northern producers commence marketing after the wet season and southern producers turnoff cattle to reduce numbers heading into winter.

MLA’s analysis of historical trends says there is a tendency for prices to ease in the second quarter compared to the first as more cattle come online, however there is “no clear trend”.

“Indeed, according to MLA’s NLRS national saleyard averages, for the past 10 years, the average price for heavy steers in June has been below the average in March for six of the ten years, but only averaging a decline of 1pc over the ten year period.

“Demonstrating the contrasting market factors from year-to year, in 2011 the average heavy steer price in June was 12pc below the average in March, while the average monthly price in June was higher than March in 2008 (9pc), 2009 (3pc) and 2010 (4pc).”

However, historical trends aside, MLA is forecasting that circumstances this year suggest prices could face downward pressure this quarter.

“If the current malaise for Australian beef in export markets, especially Japan and Korea, continues through to June, the pressure upon prices could be magnified,” it said.

“However the recent decline in the A$ will provide some hope for an improvement in export demand and prices, along with the expectation for demand from the US to remain positive.”

A gradual softening in the Australian dollar has provided some support to export categories in recent weeks.

The $A has slipped to the US $1.02 range this week, its lowest level since mid-January, after a second consecutive trade deficit triggered fears Australia’s economy  is slowing at a faster-than-expected rate. 

The strength of export demand from the US is also serving a growing source of optimism in the current market.