Key Points
- Swaps are trading inverse (lower than spot price), down 25c/kg lwt, well out to September 2025, indicating that the market continues to expect a further softening in price on the deferred contracts.
- Forecast warm temperatures for the next week will push more cattle to market, expect supplies to pick up and prices come under some pressure as a result.
- Southern processors already have made their way to Dubbo this week – it won’t be long before they continue to push north, this should provide further support for the cow market.
My estimates vs ABS actuals.
- Last week, I threw a few numbers out there on estimates for the Q4 & subsequently 2024 numbers.
- I underestimated all 4 estimates I put out, and the reasons are as follows;
- For 2024 cattle slaughter my estimate was 8.25 million head, when in fact actuals were 8.303 million head à the NLRS vs ABS difference continues to widen, in Q4 it got to 26.3%, the calculation I used was the 4 quarter rolling average of 23.1% as at Q3 2024, so when estimating Q4 slaughter at the lower end, this explains the 53,000 head I didn’t calculate for.
- Clearly NLRS reporting is continuing to capture a lower share of actual processor throughput – which indicates processors are either A) not reporting to MLA at all or B) are choosing to pull back reporting to MLA in an ad-hoc manner.
- Beef production I estimated at 643,000 tonnes for Q4, this was 20,000 tonnes lower than the actual result of 662,000 tonnes, I used the assumption of carcase weights averaging 308kg/head in Q4 which was 2kg/head lighter than the actual results and combined with slaughter being higher than my Q4 estimates by 54,000 head, these combined factors mean that production was that 20,000 t higher.
- I underestimated all 4 estimates I put out, and the reasons are as follows;
- The female slaughter volumes I estimated were 75k head (est, 1.03 m head vs 1.104 actual) lower because the NLRS vs ABS difference blew out 10% to 43% for female kill only, which is the reasoning for the underestimation.
Supply
- As suspected last week, numbers picked up out of the yards à moving forwards, saleyard supply should continue to grow, numbers have come back substantially following a really strong January but I think these volumes will rebuild into March.
- Any early calving spring herds will see weaning begin soon, which in turn will drive higher supplies of cast for age cows, the processors will be looking forwards to these numbers, as is a seasonal occurrence. Particularly watch northern NSW & southern QLD.
Demand
- Restocker interest dissipating fairly quickly despite the recent rains across a big part of the eastern seaboard – I think this plays into the confidence factor I keep coming back to, QLD / NSW particularly.
- Processors scrambling for cows, saleyard market up 25c/kg lwt this week, plenty going direct and the yards had a big yarding of cows this week but the market picked up strongly – this US trim theme is going to remain a constant for some time yet and it’s the driver.
- At this point in the cycle the demand pendulum sits with the buyers and you can see with the way markets are priced that’s how its performing, finished and feeder interest remains solid.
- Southern processors already have made their way to Dubbo this week – it won’t be long before they continue to push north, this should provide further support for the cow market.
Price
- Nearly on queue, Angus basis against flatbacks continues to widen and its now at its highest level since October 2024 at +25c/kg lwt. Remember basis is premium/discount to flatback price.
- This dynamic is like clockwork, March to October of the same year basis widens and October-March of crossover years it tightens.
- As above in terms of demand, restocker markets the softest in the saleyards this week, there should be a similar softening in the AuctionsPlus sale tomorrow, reflecting the broader interest in restocker cattle at present.
- Big price disparities between the northern saleyard markets and the southern ones, the poor seasonal conditions are the underlying cause of this.
- Swaps are trading inverse (lower than spot price), down 25c/kg lwt, well out to September 2025, indicating that the market continues to expect a further softening in price on the deferred contracts.
Weather
- A few conversations have indicated that dry weather continues to creep into northern NSW in patches, something to be mindful of moving into Autumn.
- The second half of March is forecast for major rains for northern Australia, this should affect the market in some capacity if it extends down into central/western QLD and will ultimately set the north up very well for another year.
- ECMWF 7 day temperature outlook below à expect this hot weather to force more cattle to the market with supplies out of the yards to rise again next week, processing plants will be kept busy as well.
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