Processing

Early grid prices kick surprises, as cattle supply tightens

Jon Condon, 23/04/2014

teys-boning-room-hqIT’S happened some weeks sooner than many market onlookers suspected, but there’s been a strong kick in over-the-hooks grid prices in the heavily-concentrated southeast Queensland export processing region this week.

Many grids went up 5-10c/kg yesterday or Easter Monday, in some cases on top of a 5c/kg rise the week prior to Easter.

On a 350kg dressed weight steer, that’s worth up to another $52.50 in the back pocket.

Best cows have now reached 320c/kg dressed weight on some large SEQ processor grids – the best money seen since late 2012, or very early 2013.

Other SEQ quotes obtained yesterday included milk and two-tooth steer 360c/kg, four-tooth 350-355c/kg. The adjustment has come across the board, with other categories all shifting north. Grassfed MSA steer this week sits around 370c/kg in southeast Queensland, with conventional yearling 360c.

At the specialty-end of the steer spectrum, grassfed EU steer today is fetching 410c/kg on some SEQ grids, while Certified Organic steer are making a fantastic 530c/kg dressed weight. That values a 330kg Organic steer at $1750.

As is often the case in a rising market, saleyards prices were in many cases ahead of grid money last week before Easter, because of the lag factor, but with the latest grid corrections outlined above, the cow money, is again back close to equilibrium in net-terms. Particularly light saleyards numbers prior to Easter contributed to the physical price differential, plus the tendency for processors to ‘top-up’ via the saleyards system, buying to fill a kill requirement at times like this.

If history is anything to go by, the reverse might apply next week. Saleyards numbers, after quiet weeks, are likely to swell dramatically, spurred-on by the lift in meatworks rates, and the time of year for traditional strong turnoff. An oversupply situation could emerge, pushing comparative saleyards prices below direct consignment prices again. The proviso on that, as always, is no further rain disruptions.

Roma store sale next Tuesday is already talking about drawing for 7500 head or thereabouts, up from 4000 this week.

Supply is obviously the big driver in recent grid price rises, despite the sequence of short kill weeks both this week and last due to public holidays.

Some observers had forecast that the period of disrupted kills would have to clear first before there was any real sign of the much-anticipated price increase, especially given that some processors already were well-covered with bookings, either with or without a price, for the short-weeks period.

 

‘Phantom’ bookings contribute to price trend

So-called ‘space’ bookings, where a vendor secures a kill slot, without a price, have also disappeared in front of processors’ eyes in the past week. One processor complained that in some cases, it appeared that the same cattle had been ‘booked’ two, and in some cases even three ways.

“When we go to them, the physical numbers just aren’t there,” he said.

The latest 5-10c/kg rise yesterday may also be an attempt by some processors to flush-out a substantial run of cattle, in the knowledge that prices are only likely to rise further later. In a dramatic turnaround on circumstances of only a few weeks ago, booking inventories are now light-on, in some cases, meaning processors again want to gather some killable cattle numbers around them.

May is traditionally a strong turnoff period anyway, suggesting prices may stabilise at this current level for a period, before another rise, or rises, in a month or so’s time.

“This rise will dig enough cattle out to stabilise the market, somewhat,” a knowledgeable cattle market source said this morning. “What happens after that is harder to speculate on, but there’s no escaping the likelihood of general shortage of killable cattle,” he said.

 

Kill numbers drop 23pc

There was no surprise in seeing last week’s seven-day Eastern States kill to Friday ease by 23 percent to 125,454 head.

The Easter Friday holiday easily accounted for that, in addition to several plant closures due to seasonal maintenance programs. This week will be even worse, with holidays both Monday and Friday, and nil prospect of a Saturday kill at most large sheds. Expect to see a number somewhere in the low 100’s for this week’s Eastern States kill, before normal cycles resume next week.

Kills in all states fell by percentages in double digits last week, the National Livestock Reporting Service reported.

Queensland recorded throughput of 60,133 head, down 26pc on a week earlier, while NSW was minus-23pc at 29,840 head. Victoria declined by 19pc to 24,242 head; South Australia was back 16pc to 7378 head; and Tasmania back 26pc to 3861 head.

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