Markets

Market outlook hangs on $A and winter turnoff

Beef Central, 18/06/2012

A return to higher yardings last week resulted in mixed price trends at saleyard level, with feeder and trade steer prices rising marginally but all other categories easing on the previous week.

Despite the disruption caused to supply by last Monday’s Queen’s Birthday public holiday in the eastern States, national throughput was almost 20pc higher for the week.

Behind the rise was the return of the Muchea sale in Western Australia after a public holiday the previous week, and a135pc week-on-week jump in Queensland. This was based on the return of the Roma Store and Longreach markets which were both cancelled the previous week due to heavy rain.

While numbers were up quality has been generally down in line with the colder temperatures. The National Livestock Reporting Service described the majority of cattle yarded in the eastern states as "plain and unfinished", with the exception of several good lines still scattered throughout the northern states.

The Eastern Young Cattle Indicator closed the week last Friday 3c higher at 373.75c/kg.

Feeder steers averaged 3c higher to 199c/kg and trade steers improved marginally to 363c/kg.

All other categories declined on the previous week, with medium steers falling by 8c to 327c/kg; heavy steers down by 2c to 339c and medium cows down 7c to 269c.

The NLRS’ five primary national saleyard price indicators are all running at close to the same levels as last year. Feeder steers are 6c/kg lwt lower, trade steer values almost on par, medium steers are 9c/kg lwt higher than last year; heavy steers 3c/kg lwt higher and medium cows 1c/kg lwt lower.

The national rainfall outlook points to relatively clear skies across the country this week and a move away from the wet weather disruptions that have influenced price movements in recent weeks.

The return of the $A to above parity is another key factor at play this week.

A lower $A in May and early June helped to cushion the impact of deepening instability in Europe and the associated softening of global economic sentiment.

However the $A climbed back above the US 100c mark last week, largely because of its perceived attraction as a “safe haven” for central banks and sovereign wealth funds amid increasing global market turbulence, according to analysts.

In its weekly report last Friday Meat and Livestock Australia said the main hope for the price outlook was for subdued demand to turn around during the winter months when cattle supply moved into a traditional seasonal lull.

“With beef production seasonally contracting into the third quarter, there is time for export beef demand to improve in order to cope with the increase in cattle supplies expected to come through in late spring and early summer.

“However, given the global pessimism at the moment, where and when this improvement could come is still difficult to gauge.”

The expectation that supply trends will follow usual seasonal patterns this winter also could be countered by the potential impact that a backlog of slaughter cattle may have on cattle flows over next three to four months.

As Beef Central wrote last week, relatively modest kill rates across Eastern Australian so far this year and the wide expectation that good numbers of heavy cattle were still available in the paddock point to the potential for larger than usual numbers of heavy-weight cattle to come forward this winter.

“While producers faced with a good body of feed in many regions have the flexibility to retain stock, those ‘unkilled’ cattle currently in paddocks must hit the market sometime, and the possibility now exists that that could happen in a less than orderly fashion. A log-jam would not help in sustaining livestock pricing, particularly while demand in Japan and Korea remains subdued,” Beef Central wrote in its article “Rain puts handbrake on southern processing activity” last Wednesday. 

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