THIS time last year the spread between Australian and United States heavy steer prices had widened to the largest discount on record.
Fast forward to October 2024, and it can be seen on the graph above (Australian heavy steer price marked in orange, US in blue) that not much has changed in US cattle pricing, as the North American industry is still experiencing herd liquidation, tight cattle and beef supplies, and very high historic pricing levels.
Indeed US heavy steer pricing has been climbing through September and sits (as of yesterday) at around US412c/kg liveweight, which equates to about 610c/kg on a live weight basis in Australian dollars.
Meanwhile much has changed for the Australian Heavy Steer with prices much stronger than the lull seen towards the end of 2023. In Australian dollar terms, our Heavy Steer sits at about 320c/kg liveweight, which translates to around US220c/kg.
In percentage price spreads the Aussie Heavy Steer remains at a price discount to the US equivalent, but this isn’t an uncommon occurrence as the long term average percentage spread sits at a discount of about 30pc.
Historically, since the late 1990s the ‘normal’ range in the spread has fluctuated between a discount of 10pc to 45pc, as demonstrated by the grey shaded area on the chart shown below. This shaded area represents one standard deviation in the variance of the spread historically above/below the long term average spread discount of 30pc. Another way to look at it is that it is the boundary where the spread has traded for around 70pc of the time, historically speaking.
Currently the spread of Australian to US cattle prices sits at a discount of 45pc so it is sitting at the bottom of the ‘normal’ range. Worth noting, also, in the graphs above and below is the period during 2020 and 2021 when Australian prices were in fact above those in the US, due to local herd rebuilding following drought.
However the seasonal spread chart (below) shows that often during the September/October timeframe the spread discount tends to narrow. Indeed as the 2024 seasonal trend highlights, the spread has narrowed since June 2024, but as it is coming back from a rather heavily discounted base earlier in the year (circa 60pc spread discount in January) it is taking some time to move back into the ‘normal’ range when measuring on a seasonal basis.
Source: Matt Dalgleish, Episode 3
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