Real cattle prices highest in 30 years

01 July 2015


Not only are cattle prices currently at record highs in nominal terms, after accounting for inflation real prices are the highest they have been in 30 years. As illustrated in Figure 1, so far this week, yearling trade steers (330-400kg, C3) have averaged 562¢/kg cwt nationally.  After removing the effects of natural increases over time (inflation), this puts farm gate prices at levels not seen since 1985.

 

Historical-yearling-steer-price.bmp

 

In fact, in today’s dollars, national trade steers have only averaged more than 500¢/kg cwt twice in the past two decades, in 2001 and 2005. The increase in 2001 occurred off the back of three wet years, 1998-2000, a falling A$ and strong export demand from the US. In 2005, cattle prices were supported by increased export market share in Japan, following BSE trade restrictions on imports from the US.

The latest rise in Australian cattle prices has occurred as a result of short term rain relief across parts of the eastern states, a weakening A$, high global cattle prices and strong export demand for Australian beef. The rise has also occurred in the context of a much anticipated contraction in supplies once Australia, particularly Queensland, phases out of drought and beef production declines.

Looking beyond 30 years, current prices would need to get to 700-800¢/kg cwt to be comparable with the highs of the 1970s however, as outlined in The history of Australian cattle prices since 1970, during the beef crash prices also hit record lows. Even though cattle prices were depressed over the past two years, as a result of prolonged drought, given the strong export market and current trade agreements, real prices were not as low as previously experienced.

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