Was October 2016 the EYCI’s tipping point?

23 February 2017

The Eastern Young Cattle Indicator (EYCI) spent almost 10 weeks in uncharted territory in 2016 (from August to October), when it was above 700¢/kg cwt. Since then, however, the market has been in a general decline, despite the ongoing short cattle availability.

In fact, since the EYCI started to decline in October last year, the number of cattle processed each week across the eastern states has also been easing. Over the past 18 weeks (when the EYCI’s downward trend commenced), the total number of cattle killed was 2.05 million head, down 13% from the year before. Over the same period, the number of cattle that passed through Australian saleyards was 8% lower than this time last year, at 833,630 head.

The big difference between the two periods is that from October 2015 to February 2016, the young cattle market was increasing, while over that 18 week period this time it was trending in the opposite direction.

At the same time, there has also been many challenges in Australia’s key export destinations, including an unfavourable strengthening of the A$, heightened US competition, and limited Australian beef.

Considering the ongoing constrained cattle situation is failing to buffer the young cattle market, and despite availability likely to remain a challenge for the majority of 2017, it is unlikely the EYCI’s downward trend will turn around dramatically any time soon, meaning that October probably was the tipping point.

Interestingly, if the softening trajectory continues, the EYCI could in fact soon be registering “year-on-year declines”. After now having fallen 100¢/kg cwt from the record high (725¢/kg cwt, August 2016), the EYCI is now only 20¢/kg cwt above where it was this time last year. If/when the EYCI dips below year-ago levels, it will be for the first time since 27 March 2014 – meaning almost three consecutive years of higher year-on-year cattle prices could be coming to an end.

This should be taken into consideration by producers when conducting budget forecasts for 2017/18.

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