Markets

Wagyu prices easing as bigger numbers come forward

James Nason, 30/06/2017

Angus cows with Wagyu x calves at foot

 

A SOFTENING in feeder cattle prices is also being reflected in the market for Wagyu-infused cattle.

Not long ago any feeder or backgrounder cattle with Wagyu content were attracting buyer competition, with liveweight prices of 700c/kg and above on AuctionsPlus in particular driving widespread interest.

But with those premium prices has come a significant increase in Wagyu calf production, meaning buyers are now reporting a strong supply of Wagyu cattle coming forward – at all ends of the quality spectrum – allowing them to be more selective and creating a tougher market for lower genetic quality Wagyu and Wagyu cross cattle.

Several buyers have told Beef Central this week that prices for Wagyu F1s, particularly lower grade animals lacking top bloodlines and breeding, have slipped by about 15-20 percent over the past few months.

One buyer said he paid around 550c/kg liveweight this week for similar Wagyu F1s to those he paid 630-650c for a few months ago.

This is not a Wagyu-specific trend, however. As Beef Central reported in Tuesday’s weekly kill report, the market for all feeder cattle is easing. Flatback 400kg steers in southern Queensland worth 335c/kg or better a few weeks ago were selling for 325c this week in paddock sales direct to feedlot, and perhaps less in saleyards, according to buyer comments.

Driving this more general trend appears to be more numbers coming forward; combined with the recent sharp rise in feedgrain prices – which have risen between $30/t and $50/t in June, or 15-25pc, according to different reports – as dry conditions downgrade this year’s wheat production outlook.

The EYCI shows a similar trend. It has fallen by five percent in the past month, easing from 650c at the end of May to 621c at the end of June. (Its peak so far in 2017 was 668c almost 12 weeks ago on April 10).

Price gap emerges

In the Wagyu market, a price gap is now emerging along quality lines.

“Basically it comes down to the numbers now coming forward,” was one buyer’s succinct summary.

Seemingly less affected is the higher quality level. Production of higher grade, higher marble score Wagyu infused cattle – such as F1s from the most in-demand bloodlines and out of quality Angus females, and F2s and F3s – has not grown much in recent years. Most new production has focused on producing F1s – not just Wagyu x Angus but Wagyu crossed with various breeds. As a result demand for beef from the higher quality F1s, F2s and F3s remains strong and relatively under-supplied, and values are holding up well. “We could legitimately sell twice the beef if we had the (marble score) 7s, 8s and 9s to sell,” one buyer commented.

It is the higher volume, lower-marble score Wagyu F1 market where prices are now under pressure. Bigger volumes of these cattle are now coming forward, at all ranges of the quality spectrum, allowing buyers to be more selective.

The Australian Wagyu Association has been trying to capture just how much production has grown in a recent survey, but is yet to release the full results. A snapshot was released at the recent AWA conference in Albury, NSW, but that data was based on early results when mostly studs and few commercial breeders had responded, so did not provide a complete picture of overall joining and production trends.

However, one feedlot buyer who specialises in buying Wagyu and Angus cattle and watches production closely, told Beef Central he is confident that there will be twice the number of Wagyu infused cattle weaned this year compared to two years ago.

“These were people chasing that inflated money, but we are now seeing the truer value being paid for this stuff, consistent to a longer term sustainable Wagyu premium,” he said.

“There’s plenty of choice now. This day was always going to come.”

“There’s plenty of choice now,” was another buyer’s comment. “This day was always going to come.”

Product that can be differentiated on likely quality outcomes will continue to be in demand, one explained.

Wagyu branded beef with marbling scored 3, 4, 5 competes in export markets directly with USDA Choice grade beef out of the US and higher-grade international competition. Beef produced from the right bulls and females and longer fed for over 350 days could still attract a brand premium for Wagyu, the buyer said. But product that lacked the right breeding and needing to be fed in a cost-of-production type model for less than 350 days may not be able to adequately differentiated from long-fed Angus in the market.

“To give you an idea why it is softening, a lot of these cattle are being bred from purebred* bulls, not registered Fullblood* bulls, which we can’t handle in our system,” one lotfeeder said. (*Purebred refers to animals bred-up from other breeds to high percentage Wagyu over multiple generations, while Fullblood refers to an animal directly descended from a Japanese Wagyu sire and dam.)

“Because of the high price of cattle, our Japanese customers are getting very, very selective and they’re wanting that quality to come to the fore.

“We were short of cattle last year and we had to compete to buy cattle that probably weren’t suitable. This year with extra Wagyu-infused feeder cattle about, there is going to be a big gap between those cattle.”

Another feedlot operator said he had been inundated in recent weeks with calls from F1 producers wanting forward contracts. However, his view of the next 400-day market cycle, with the US cow herd at high levels and rising grain prices pushing up feeding costs for feedlots, is that Wagyu F1 prices are likely to fall further – so new forward contracts today would not be written for anyone other than existing long-term, loyal suppliers.

Producers encouraged to ‘grade up’

“Over the last 18 months with the market being so overpriced, you could put anything with Wagyu on AuctionsPlus and get a lot of competition,” one buyer commented.

“A lot of these guys were just putting Wagyu bulls out, it was easy money, but not a lot of them have gone out and found good quality cows or F1 or F2 and actually graded-up.

“We’re trying to line-up with people who are heading in that direction, we’re encouraging people to go and find F2s and F3s and grade up, improve their marbling score by half a score a year, for the next three years, and you should be able to attract yourself the $7 still.

“The reality is Wagyu have been fairly over-inflated, much more than other beef cattle in Australia, and it is probably at a stage now where it is starting to normalise, and on average that true value is probably still below where it sits today.”

 

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