Aussie cattle prices gain ground on US, but still a way behind

For many years there has been a strong relationship between Australian and US cattle prices, with Australian trade cattle, in A$ terms, averaging 106A¢/kg lwt behind similar articles in the US for the ten years to 2012. Similarly, Australian heavy steers averaged 66A¢/kg lwt behind US choice fed steers over the same period.

The primary reason for the long term relationship and US being the price leader is due to that market being the world’s largest beef producer and consumer.

This relationship diverged significantly in 2013, when the drought depressed Australian cattle market coincided with steadily increasing prices in the US caused by tight cattle and beef supplies. The trade cattle averaged 154A¢/kg lwt behind, and heavy cattle were down 109A¢/kg lwt.

Exacerbated by a rapid lift in US cattle prices, resulting from beef production dropping to a 20 year low, this divergence continued during 2014, and trade steers averaged a 310¢ discount, while heavy steers averaged 187¢/kg lwt behind.

The gap between the two countries peaked in April 2015, but has narrowed since then, largely due to the rapid rise in Australian cattle prices, while US prices have remained relatively high. In fact, the gap in trade steers has closed 50¢ in the past three months, to 348¢ last week, while at the heavier end of the market, the gap has closed almost 100¢ over the same period, to 147¢/kg lwt last week.

While Australian cattle prices have narrowed the gap on US prices slightly in recent months, there is still a long way to go if the market is to move back to the long term difference of 106¢ for trade cattle and 66¢/kg lwt for heavy steers. Encouragingly, recent USDA forecasts have cattle prices predicted to remain strong – meaning if the long term difference is to return, it will be Australia catching up, rather than the US falling back.