Limited supply and burning demand
Parks and slaughterhouses both contracted in the past week, indicating an increasingly tight supply in livestock markets. Slaughter fell by 7,607 head, or 8%, while yards fell by 4,091 head, or 10%.
The main source of the decline in killings was the key states of QLD and NSW, which saw 10% and 6% drops in processor throughput, respectively.
Yards plunged in NSW, where numbers fell 33% week after week, but the trend was not followed in other states, which were largely flat.
The generally high prices for many categories of cattle this week suggest that the downward trend in the number of cattle offered to both sales yards and to processors, via direct hook channels, was likely repeated this week, we so don’t expect a significant increase in supply to be reflected in next week’s numbers. Historically, slaughter at this time of year generally tends to go down and could go down, which supports this view.
The EYCI was firm this week, rising another 9 (1%) to 1,029 ¢ / kg cwt, despite significantly stronger yards over the past week, which rose 32% the week before 14,437 heads. This rise in prices, in the face of a higher supply, suggests that the demand for young cattle is currently very hot, a situation which should give producers a lot of confidence. Prices in Rome increased from 11 to 999 / kg cwt, on yards higher by 16%, while Wagga Wagga prices increased by 18, to 1,074 ¢ / kg cwt with eligible yards up massive 197% week after week. In Dalby, average prices slipped 5 ¢ to 1010 / kg cwt, despite a 38% reduction in eligible pens as the price drop was due to an increase in the proportion of cheaper heifers.
On national indicators, the result was mixed, with prices for processors and steer calves increasing 2-3%, but prices for medium and heavy steers weakened slightly, dropping 1-2%.
Prices for 90CL frozen cows were flat last week in Australian dollars, but prices increased by half a cent a pound in US dollars, with Steiner reporting that the imported beef market in the United States continues to suffer from a shortage of supply.
The Australian dollar fell again 1% against the US greenback to US 0.729, dragged down by iron ore prices plummeting 11% yesterday and stronger US retail sales data supporting values of the US dollar.