Finished cattle attract price premiums

07 November 2018

Expensive stock feed and a lack of pasture has seen the supply of quality finished cattle tighten in recent months. On the demand side, rising Asian consumption and a depreciating Australian dollar have strengthened the position of Australian beef in the global marketplace. These forces continue to impact farm gate prices, with heavy weight cattle attracting price premiums over store condition cattle.

Focusing on over-the-hooks (OTH) indicators, Queensland has seen the strongest gains recently, with many indicators rising to levels not seen since February 2017. Between 2 July and 5 November 2018, the Queensland OTH heavy steer indicator rose 84¢, or 18%, to 553¢/kg carcase weight (cwt). Looking to other states, the NSW heavy steer OTH indicator rose 4% to 518¢/kg cwt, while in Victoria prices fell 1% to 501¢/kg cwt.

Increased yardings saw prices for store condition cattle ease during the week, while heavy steer categories generally saw slight improvements. On 1 November, the eastern states heavy steer indicator rose above 300¢/kg live weight (lwt) for the first time since June 2017.

The recent divergence in prices for young cattle and finished cattle continues a longer-term trend, which is unlikely to change unless widespread rain occurs to encourage restocker competition.

Supply limitations are having an impact on prices for finished cattle; however, there are other forces at play, including the depreciating Australian dollar. On 5 November, A$1 was buying US71.9¢, down US4.7¢, or 6% year-on-year.

Currency fluctuations have less of an immediate impact on Australia’s young cattle markets, which are heavily influenced by seasonal conditions. However, given 70% of Australian beef is destined for export markets, they do have an important influence. The effect of a depreciating Australian dollar has filtered through the supply chain, reflected in the strength and stability in finished cattle prices throughout 2018.

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