Markets

2015 shaping up to re-write EYCI records – but driven by different forces than 2011

Meat & Livestock Australia, 05/03/2015

AUSTRALIAN cattle prices had an extraordinary year in 2011, with the Eastern Young Cattle Indicator (EYCI) averaging 396.52¢/kg cwt, which was the highest calendar year average on record.

mla-logo-paddedInterestingly, the only significant opposition to prices then was the high A$, while all other factors were very much in the producers’ favour, MLA’s weekly bulletin circulated Thursday afternoon says.

In fact, the number of cattle included in the EYCI for the year-to-date in 2011 was 18 percent lower than this year and the number of cattle killed across the eastern states for the year-to-date was also 18pc lower – each working in the producers favour.

In addition, and ultimately underpinning the lower saleyard and slaughter offerings, rainfall across most of the country was ‘very much above average’ for the summer, as opposed to ‘below average’ this year.

During 2015 however, the supply forces have been against producers, with high offerings evident during what have been prolonged dry conditions, MLA’s weekly bulletin says. The main factor supporting prices has been the strong international demand, assisted by a significantly weaker A$ in comparison to 2011, which for the year-to-date has averaged 21pc lower.

Pulling all this together, 2011 highlights how far cattle prices can go and be sustained when there are tight supplies, even if the A$ is at high levels. In contrast, 2015 indicates the influence a strong international market can have, despite historically high slaughter and limited restocking interest.

Potential for cattle price rises ‘significant’

Looking forward, provided the international trade environment remains strong over the coming months, the potential for cattle price rises is significant, especially if supplies contract back towards 2011 levels, MLA says.

Despite slipping in recent weeks, the Eastern Young Cattle Indicator is still well and truly in the 400¢ territory, and for the year-to-date, has averaged 443¢/kg, up 51pc year-on-year and up 12pc on how 2011 started.

A further interesting point in comparing this year with 2011 is that 2011 holds the record for the length of time that the EYCI stayed above 400¢ (38 consecutive sale days). The current sequence is now at 35 days, and easily on track to surpass that record (428.75¢/kg on 5 March).

 

US imported beef market ticks up

Meanwhile, MLA today reports that for the first time since January, imported beef prices in the US recorded a significant upward movement this week.

According to the weekly importer survey conducted for MLA by Steiner Consulting, the 90CL cow beef indicator was 6.5US¢ higher this week, at 211.5US¢/lb (up A20.7¢ to A562.2c/kg).

There was also an improvement in the similar imported beef indicator reported by Urner Barry in their daily Beef Report/Yellow Sheet.

Steiner’s commentary suggested that there was less beef being offered by Australian exporters (but still large volumes from New Zealand), and some more activity among US buyers and end-users.

The lack of use of imported beef in the retail market is still hampering further upward movements, however, as the domestic 90CL indicator remains close to the 300US¢/lb mark.

US cattle futures were also generally higher this week, suggesting a more positive outlook for the cattle and beef business in coming months, but this market remains volatile, so caution should be the word until there is a recognised upward trend over at least a few weeks.

This week also saw the release of the January US Restaurant Performance Index (RPI), which gave a somewhat surprisingly positive result, given the press the severe winter weather in North America. The RPI was 102.7, suggesting a strong expansionary phase for the US foodservice sector – with the current and expected sectors of the index almost the same, at 102.7 and 102.8, respectively.

An RPI above 100 indicates expansion in the sector, and below 100 indicates contraction.

 Source: Meat & Livestock Australia

 

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