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By Matt Dalgleish | Source: MLA, Auctions Plus, AWA, Trade, Mecardo.
Key points
· F1 Wagyu prices on the AuctionsPlus platform have slipped to fluctuate around the EYCI over the last twelve months.
· Trade sources suggest that via direct channels F1 Wagyu cattle are achieving a 30%-45% premium above the EYCI.
Our last Wagyu update released in November 2018 showed that the Wagyu premium on AuctionsPlus had all but eroded. Recent discussion among Wagyu industry participants suggested that the premiums were returning to the market, so we have gone back to the data to assess if the anecdotal evidence stacks up against the AuctionsPlus figures.
Read the November 2018 Wagyu analysis here.
The AuctionsPlus wagyu sales data was filtered for F1 steers and heifers (mainly the Angus F1 crosses) that were a good match for EYCI eligible cattle, and the average monthly price is shown plotted against the EYCI in Figure 1.
It demonstrates that in the second half of 2018 there were a few times when the F1 Wagyu price managed to gain some ground on the EYCI reaching toward a 30% premium spread, but it could not be maintained for long. In recent months, the F1 Wagyu on AuctionsPlus has been running at a discount to the EYCI. Indeed, for the last four months the F1 Wagyu on AuctionsPlus has averaged a price of 427¢/kg cwt compared to an EYCI average of 475¢ over the same time horizon.
Furthermore, analysis of the percentage spread premium/discount highlights the failed efforts of the F1 Wagyu to break back into the "normal" historic spread zone between 20% to 95%, as highlighted by the grey shaded area on Figure 2. In May 2019, the F1 Wagyu spread dipped to a record low of a 26% discount to the EYCI before recovering toward a 10% discount most recently.
AuctionsPlus Wagyu sales data has also been compared to MLA based feeder cattle indicators on the Australian Wagyu Association (AWA) website and it shows a similar deterioration in the spread achieved from the 2017/18 season to the 2018/19 season as outlined in this analysis piece.
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The AWA website notes that "Wagyu F1 sales reported by AuctionsPlus represent a small proportion of total Wagyu F1 sales and that the data listed may not reflect direct supply relationships". Furthermore, Angus Street (CEO of AuctionsPlus) confirms that many vendors selling via their platform during the 2015-16 seasons did not return to the platform as the spread deteriorated during the 2017-18 period. This suggests the more recent F1 Wagyu data is reflective of a different marketplace to the one that was being reported a few years earlier.
Certainly, Mecardo discussions with several Wagyu industry participants suggest that via direct channels it is not uncommon to see F1 Wagyu cattle achieving a carcass weight price between 650¢-750¢ currently, which equates to a 30%-45% premium above the EYCI.
What does this mean?
Anecdotally, the industry chat suggests that the F1 Wagyu lines making their way to the AuctionsPlus platform are the ones that are unable to achieve the prices producers want through the direct channels. This poses a bit of a problem for the industry and for a company like Mecardo that thrives on data to explain market dynamics.
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It seems to be a data problem rather than a Wagyu problem, as the only available data isn't reflective of the wider Wagyu industry and the AuctionsPlus Wagyu data accounts for less than 5% of market volume. This limits the ability of participants to make informed marketing and production decisions. Perhaps it is time to consider a more regular, wider data capture of the sector and more frequent reporting of some key metrics based around price, supply and demand.
Mecardo would be eager to support this initiative and to be involved in the process as independent market analysts. We would like to hear your thoughts on the matter, along with an indication of your willingness to participate in a forum to try to provide greater data driven insights for the Wagyu sector. Email us at ask@mecardo.com.au
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