MANY Southeast Queensland direct consignment grids have continued their inexorable rise this week.
Like the ancient Romans over-running Carthage, the over the hooks numbers continue to move forward, pushing further into uncharted territory.
While some grids were unchanged over the last seven days, others have risen another 5-10c/kg.
SEQ processor grids seen this morning saw best heavy cows for February kill at anywhere from 425-435c, four-tooth grassfed heavy steer 435c-450c, and milk and two-tooth steer 445-455c. Best SEQ quote for MSA steer seen this week is 460c.
Compared with the best prices seen late last year, the cow is now up to 65c higher, dressed weight, in price; and four-tooth heavy grassfed ox 50c higher. PCAS-eligible steer is now quoted at an unheard-of 500c/kg.
Part of this week’s further price jump can be explained by the fact that most Queensland plants are now back in full-swing.
JBS Dinmore added its second shift last week, doubling daily throughput to 3400 head, and export sheds further north at Mackay, Townsville and Rockhampton have returned to normal rosters.
It’s reflected in Queensland’s seven-day throughput last week, which reached just short of 75,000 head. In any other year apart from last year, that would be regarded as a near-normal weekly kill.
That expansion in processing numbers has added to demand pressure for cattle, and it’s reflected in the grid adjustments described above.
“We’re back to where we were three years ago: short of cattle in January, and looking for slaughter stock,” a processor contact said this morning.
Supporting that is how well saleyards prices have held up over the past week, despite the sheer weight of numbers coming forward, attracted by higher pricing.
Compensatory gain’s ‘free kick’
Another part of the explanation for further price lifts, is that the best weightgain performance since the rain is still to come.
Protein levels in post-rain feed will reach their peak between now and March, meaning many producers who have enjoyed the benefits of rain are going to be reluctant to sell cattle now, despite the prices on offer.
Another factor is compensatory gain.
After 18 months of drought, there is ‘inbuilt’ compensatory gain potential to be had in paddock cattle today, that producers are going to be reluctant to part with, before they can extract maximum benefit.
Depending on the class of cattle and the type of country they are on, compensatory gain caused by earlier restricted nutritional intake during drought, can add weight exponentially, providing an additional 10-20pc to cattle gain performance. On the right country, gains of 1.5kg/day are possible under ideal grass conditions at present. Feedlots have been extracting the benefit of compensatory gain in drought-impacted cattle for years, but its benefits are equally applicable in a paddock of fresh feed.
“For anybody who does not have to sell now, and who now has feed coming away, cattle are doing extremely well. Compensatory gain after last year is certainly a part of that,” a trusted processor source said.
“They’re sitting there watching cattle pile on the condition, and are hoping to maximise their return, through weight, rather than being tempted by today’s prices – despite how attractive they are,” he said.
“But there will be a trigger-point at some point over the next couple of months, when cattlemen decide to move. Those people sitting back making those decisions now will say, ‘it’s time to go,’ and when that happens, we’ll see some greater numbers coming forward. The trick is to avoid everybody doing it at once.”
Six to eight weeks from now – around mid to late March – might see those bigger direct consignment cattle flows start to kick in.
Another significant part of the pricing equation at the moment is the A$. One large processor did its livestock costings last week on an A$ at around US82.5c. This week, that same exercise was done on US79.20c. It makes it hard to believe that the same meat only 18 months ago was being sold on international markets at above US108c, pushing the export beef industry onto its knees.
Rain has moderate impact
Rain last week across parts of southern and Central Queensland and NSW has had a moderate dampening effect on supply, with processors reporting a few consignment cancellations caused by trucks unable to get out, or roads impassable because of wet weather.
Compensating for that is a large supply of grainfed cattle on hand, with most feedlots located on all-weather road systems which makes them a ready source when numbers fall unexpectedly short.
Many processors also place cattle on feed late in the year to provide some ‘insurance’ against rain disruptions in January/February. That happened as usual last year, with a variety of descriptions, including cows, entering feedlots to provide a ‘bank’ of killable stock for the first couple of months of the new season.
Those unusual lines with history attached to the drought will clear over the next month or so, processor sources suggest.
With some market watchers tipping mid to late March, before bigger lines of better finished cattle start coming forward, this should align conveniently with the decline in the large numbers of feedlot cattle currently included in kills.
Kills climb back close to normal levels
Last week’s Eastern States weekly kill reported by the National Livestock Reporting Service reached 162,227 head, up another 25,000 head on the previous week and now approaching ‘normal’ seasonal cycles.
While Queensland was still 7 percent behind this time last year at 74,727 head, southern states were very active.
NSW record its second consecutive 2015 kill above 40,000 head – reaching 40,729 head, despite time lost at Wagga due to a breakdown.
Victoria reached 32,319 head, +11pc on this time last year; South Australia reached 9495 head, +8pc on a year ago; and Tasmania killed 4957 head, +3pc on last year’s rate.
Kills can be expected to show a fair decline in next week’s report, due to Monday’s Australia Day holiday effect.
Ancient Romans? Carthage? I didn’t know you were a student of ancient history! The Punic wars, from which this analogy was drawn, lasted 100 years, with the Romans winning ground inch by inch. Let’s hope the latest cattle price rally lasts as long!
AAC is a strong buy