Record Cattle Prices Continue to Rise to Historic Highs
Anyone in the cattle industry looking at the current Eastern Young Cattle Indicator (EYCI) can see that the recent record prices for young cattle are continuing. Feeder buyers and restockers continue to battle with each other for the limited numbers of stock available.
When the EYCI hit another record of 951.71 cents per kilogram carcase weight it rose to a level that was 199 cents above the level twelve months previously. These prices have taken us into new territory. They have not been this high since 1965 when they reached 936 cents in current dollar value. So, what has led to this surge in prices and how long will these record price levels continue?
- Young cattle prices are currently surging.
- The EYCI recently hit another record of 951.71 cents per kilogram carcase weight.
- The market is unlikely to crash but prices could stabilise by late September.
What is causing record young cattle prices?
In the east of Australia, especially to the north, strong intent to restock has been central to record young cattle prices. In the case of feedlots this has much to do with the presence of excess amounts of feed when compared with the amount of cattle available to be fed.
This lack of cattle means that Australia now has the lowest number of cattle in its national herd for 30 years meaning that demand is high.
This combination of lack of cattle numbers, high feed stocks, and high demand has led to the exceptional cattle price levels that we are currently seeing.
Current situation is not good news for cattle producers
The current lack of cattle has led to supply issues for producers. This is set to continue as feedlots and restockers continue to have a high appetite for cattle purchases. They are also in no rush to sell as herd building is on the agenda. This means that producers do not have access to the cattle numbers that they need to sustain supply levels.
This situation has resulted in many producers currently operating at a loss. In some cases this loss exceeds $300 per head slaughtered. This represents a serious dent in profits for producers in the industry. This position could continue for at least another 12 months which will cause significant problems for producers and is not good news for Australian beef globally as supply dwindles.
Will the Australian cattle price bubble burst?
Right now, it does not seem as though the bubble is going to burst on record high young cattle prices in the immediate future. However, at some point people are going to think that it’s not economically sustainable to buy young cattle at such high price levels. This is when prices should start to return to levels that are more sustainable over time.
Plus, periods when prices of commodities are high are always followed by corrections when prices reduce. So, young cattle prices will stabilise at some point, but a crash is highly unlikely. Instead, prices will probably reduce slowly and align more closely with international prices.
With this in mind, many experts expect young cattle prices will start to reduce in spring. Normally, prices start to roll off during the first two weeks in September. This year could be slightly different in that the change may not happen until the back end of September.
This could see end of September prices fall off to around 900-910 cents. Of course, this will depend on demand levels at the time. After all it’s this demand that informs records such as the EYCI and not vice versa.
Taking all the available data and opinions into account, it remains to be seen if the current record cattle prices do reach a peak soon or whether there are yet more records still to come. It will be interesting to see how the situation develops over the coming months.