Insights May 2021
Insights May 2021
- Australian cattle prices reached record highs in April and are expected to continue receiving support in the coming months from tight supply and firm demand from export and domestic consumers.
- Restocker demand will likely determine the direction of prices as a drier-than-average winter could see interest soften.
The Eastern Young Cattle Indicator (EYCI) reached a new milestone in April, passing 900c/kg for the first time. The EYCI rose 3.7 per cent from the start of the month to peak at 910c/kg in late April following good rainfall in northern Queensland which prompted another surge in restocker demand. Cattle prices eased towards the end of the month with the EYCI returning below 900c/kg and the national heavy steer indicator easing 4.5 per cent from a peak in late March. The Western Young Cattle Indicator (WYCI) remained very strong, holding above 950c/kg for most of the last month and sits at a 9.2 per cent premium over the EYCI.
Incredibly tight supply is the key factor underpinning cattle prices near record highs. In the last week of April, eastern states cattle slaughter was 30.5 per cent lower than the same week in 2020 and 30.1 per cent below the five-year average. Prices are expected to remain supported by tight supply over the coming months as a good feed base in most cattle regions heading in winter should continue to allow producers to retain stock, even if drier than average conditions eventuate in winter.
Reduced cattle slaughter in Australia is reflected in a 24 per cent year-on-year decline in beef export volumes for the year-to-April. China has been the weakest of Australia’s major markets, with year-to-date exports down 42 per cent despite China’s significant beef import demand as the pig herd rebuild remains constrained by a resurgence in African Swine Fever cases. Brazil and Argentina are the dominant exporters to China, but the United States (US) has emerged as another genuine competitor and exported more beef than Australia into China for the first time in March. Australian beef exports to the US for the year-to-date were down 39 per cent, constrained by tight Australian supply and increased US production. However, there are signs of strengthening demand ahead as the summer grilling season approaches in the US which combined with an improving COVID-19 situation has helped the US lean beef import price rise to 700c/kg for the first time since June 2020. In North Asia, year-to-date exports to Japan were down 25 per cent and up four per cent to South Korea, which has seen South Korea overtake both the US and China to be Australia’s second largest export market. Although Australian export volumes will remain constrained by reduced production, demand from international and domestic consumers will provide firm underlying support to Australian cattle prices, particularly as beef consumption through foodservice outlets further recovers from the impacts of COVID-19.
The direction of prices in the coming months will largely rest on the strength of restocker demand. Restockers are expected to remain active with paddocks still considered understocked in many areas, however a drier-than-average winter could see restocker interest soften and take away some support for prices.
Source: Meat & Livestock Australia