How the southern weaner market is shaping up
Grassed up northern buyers chomping at the bit as La Nina continues to flex are keeping their cards close to their chest heading into the big January southern weaner sales.
Their influence could be enormous.
Equally, red hot demand from southern restockers looking to replenish paddocks is creating a forecast price range for young cattle that may meet with resistance from those who also have to factor in kilometres of transport.
More than 80,000 head are set to be sold across Victorian and South Australian yards in the next few weeks, with at least 10,000 on offer at Wodonga and Wangaratta in the first installments from Wednesday.
Buyers are expected to need between $7 and $8 a kilogram live weight, minimum, to have any success.
At those rates, there is still a dollar in it for backgrounders, with feeder prices at $2500-plus, but analysts point out the trade risk is amplified at record prices.
Possibly more than usual, the cattle market this year will be driven by appetite for risk.
Elders’ southern livestock manager Matt Tinkler said numbers on offer were up a bit on last year, with the expected strong prices drawing out everything available for sale.
“People are certainly looking to take the money and roll with as many as they can,” he said.
Regardless, demand is such that even massive jumps in supply at this stage will be soaked up, analysts say.
Mr Tinkler said there were plenty of northern orders with commission buyers but price sentiment was hard to read.
“It’s very much a case right now that if you want the cattle, you will have to pay. Naturally, price will be a deterrent for some, who can’t see a margin,” he said.
“But we have been operating at this level for some time now – it’s not new.
“Communications with feedlotters is telling us customers at the other end are aware of the market dynamics and what they will have to pay to be in it.
“Margins might be a bit shorter but on a rolling average, it still looks alright.”
Mecardo analyst Angus Brown said risk was high but it was last year too and that didn’t dampen demand.
His figures show at $2100 a head for a weaner now, there was $400 before costs in profit, eating grass.
That’s not a bad trade, he said, but feeder prices would not have to drop back much for the scenario to quickly shift to a backgrounder working for nothing.
2022 outlook
While there is solid argument for upward pressure on cattle prices this month courtesy of ongoing rain in crucial regions and forecasts of more to come, the consensus for the 2022 market is a general trend lower.
AuctionsPlus market experts say the Eastern Young Cattle Indicator will challenge the 875 cents a kilogram carcase weight barrier by spring.
It finished 2021 at a phenomenal 1169.22c after a run of daily record breaking. EYCI reporting resumes on January 12.
Chief economist with the AuctionsPlus market insights team Tim McRae points out that 20 to 25 per cent price plunge in the next nine months would still leave the EYCI in the top 2.6pc of prices on record, and only back at the level seen in the first weeks of January 2021.
Mr McRae’s 2022 Cattle Market Outlook says the main factor underpinning that 875c forecast is the weight of history upon the seasonal conditions into the second half of 2022, and an expected supply surge heading into next summer.
“Another all-in rebuilding year in 2022, and the probability that the winter and spring through the southern regions cannot match 2020 and 2021 levels, will leave an equation of less feed and significantly more cattle,” he wrote.
“The addition of eager producers keen to optimise market timing could result in a significant supply surge and subsequent decline in prices.
“Following what will have been more than two years of rising returns, no-one will want to be caught napping into a falling market in late 2022 and early 2023.”