Market Reset: Eastern and Southern Australia Experiences Widespread Rainfall

Widespread rainfall in the eastern and southern regions of New South Wales, Victoria, and Queensland over the past week is set to reset market dynamics. This surge in rainfall boosts confidence among producers, who are now hopeful for a harvest, particularly in southern areas. Agents from southern Queensland and northern New South Wales noted that the recent 20mm of rain has had an impact equivalent to three times that amount.

While the rain in the north may not significantly benefit the western Downs regions, it will ensure coastal areas remain vibrant and fresh. Saleyard numbers are expected to decline this week, with variations in sales at Roma and Dalby anticipated to drop below 10,000 head, a substantial decrease from 17,000 head reported in previous weeks. Many southern markets are reaching year-low figures as producers anticipate enough sub-soil moisture for early spring pasture growth when temperatures rise.

Cow Prices Driving Market Trends

Cow prices are at the forefront this week, fueled by increasing demand for Hormone Growth Promotant (HGP)-free beef, particularly from China. In some saleyard markets, cows are now selling for more than heavy steers on a liveweight basis. For instance, at Dubbo, heavy cows fetched $4.16c/kg liveweight, averaging $3.94c/kg.

On an international scale, US fed beef prices are showing seasonal declines, yet imported lean beef prices remain stable, causing a narrowing of the profit margin between cut-out and manufacturing packs. Concerns regarding tariff levels on Brazilian beef entering the US may soon drive wholesalers to increase their purchasing of Australian products, especially as New Zealand supplies are dwindling due to the conclusion of their annual dairy cull cow season.

With plans for live export boats transporting slaughter cattle into Vietnam at rates of 320c/kg liveweight for bullocks and 290c/kg for bulls, prices are being kept competitive by southern processors. These processors are targeting HGP-free bullocks priced at approximately 350c/kg delivered to locations in North Queensland, such as Hughenden.

Grain Market Developments

As previously noted, international grain prices are softening with the ongoing northern hemisphere winter harvest and the flourishing summer crops. Prices remain stable as the market awaits Russian new crop wheat sales and assessments of the global corn crop. Current indications suggest that grain supplies for the upcoming year will be satisfactory, with higher carryover stock levels continuing to influence downward price movement.

Domestic grain markets experienced pressure towards the end of last week, responding to widespread rainfall forecasts. Old crop markets decreased by $3-5/t while new crop markets fell by $5-10/t across major feeding zones, eliminating some of the domestic premium. Track market prices have aligned with this trend, slipping $10-20/t lower in sync with international market shifts.

Anticipated Surge in Grain Feeding

The strong outlook for meat protein coupled with a subdued grain forecast suggests a potential rise in intensive grain feeding over the coming year, which should bolster feeder cattle demand. Competition from southern restockers is expected to maintain pricing integrity for heifers since there is traditionally an inverse relationship between grain prices and feeder steers.

With a substantial number of black feeder cattle previously sent for agistment set to become available from September, we may witness some of the Angus premium in the current feeder markets diminishing. As the global manufacturing beef market appears robust, it is anticipated that demand for HGP-free cattle will continue to strengthen.

As we analyse the North American markets, it will be intriguing to observe how US manufacturing beef markets respond, especially since they were mostly at a standstill last week. Exporters are currently experiencing a slump in bookings, largely due to uncertainty surrounding the potential imposition of an additional 50% tariff on Brazilian beef, which could effectively halt imports from Brazil into the US.

Conclusion

Any visible slowdown in cattle slaughter rates is likely to result in higher prices as processors compete to maintain throughput, ensuring a strategic advantage in the market.

Richard Koch, Elders

Author Richard Koch is Elders’ business intelligence analyst. He discusses local market conditions and trends with senior Elders livestock managers from across Australia each Monday morning.