Key points:
- Restocker and feeder competition pushing prices to record levels
- EYCI breaks new ground, reported at 737.50¢/kg on Tuesday
- Developing uncertainly in export markets could provide a short-term ceiling for prices.
The Eastern Young Cattle Indicator (EYCI) hit a new record this week, finishing at 737.50¢/kg carcase weight (cwt) on Tuesday 3 March, 11.75¢ above the previous record (17 August 2016 – 725.75¢/kg). The indicator is now reported 320¢ above year-ago levels.
The young cattle market has moved into record territory on the back of widespread rain continuing to fall across the eastern states. Restocker and feeder buyers, with the national herd sitting at historically low levels, are having to compete for a smaller pool of young cattle when compared to the previous highs.
Whilst not dissimilar to 2016, in that the cattle market rallied on the back of widespread rainfall, as producers were encouraged to rebuild post two years of extremely high turnoff, the latest rally comes off a much lower herd base and increased competition from the lot feeding sector. On 17 August 2016, the EYCI (7-day rolling average) reached the previous high at 725.75¢/kg cwt, with the sum of EYCI eligible head totaling 18,250 head. In contrast, on Tuesday with the EYCI reported at 737.50¢/kg cwt, the sum of eligible yardings was down to 12,200 head.
In 2016, the price lift was largely driven by restockers, particularly in Queensland. The buying dynamic in the store market has certainly shifted, with greater pressure from feeder buyers looking to secure young cattle. Feeder buyers accounted for 63% of EYCI eligible transactions in February with restockers remaining steady at 23%, albeit in February, restocker buyers averaged a 20¢ premium to feeders an inverse of the trend seen in January. In August 2016, feeder buyers averaged 45% of eligible transactions compared to 37% attributed to restockers.
Looking ahead, the indicator could gain further momentum due to the extensive supply shortages and heightened competition. However, a ceiling could also be reached. Ultimately, producers and feedlots paying top price will need to assess whether the finished returns stack up, in particular, with developing uncertainly shrouding the finished end of the market and overseas demand in the coming months.
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