By Angus Brown | Source: MLA, BOM.
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Regular readers will know that when it rains, we like to look at what it might mean for markets. Earlier in the week we looked at sheep, now it’s the turn of the bovines. Heavy falls have occurred across Queensland, but not everywhere.
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Rainfall figures for March look pretty good, with figure 1 showing above average falls for much of Queensland and parts of NSW. If we take January and February into account it adds a lot to Northern Queensland, but highlights just how far behind normal south east Queensland is.
A lot has changed in the national cattle herd since Meat and Livestock Australia produced their cattle distribution map (here), but the rankings should have remained similar.
The biggest cattle region, the Fitzroy Basin, had above average rainfall in March. The third largest region, the Desert Channels also got wet. Add to this the northern Queensland zones which are recovering from flooding, and a couple of smaller areas in NSW, and there should soon be feed in front of 40% of the National herd.
A lot of the cattle which have benefitted are Bos Indicus types, but when destocking has been so strong, even rain in the far north is going to tighten supply and increase demand all down the east coast.
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There was a small impact on cattle slaughter last week. Figure 2 shows east coast cattle slaughter was down 3%, with most of the fall attributable to Queensland. With Easter and Anzac Day coming up, it might take until May before we get a handle on supply. But there is a chance we could see slaughter back at 2017 levels shown in figure 2.
The impact of the rain on price has been dramatic, with figure 3 showing the jump in the Eastern Young Cattle Indicator (EYCI) and the Cow price being the most pronounced. Heavy Steer prices were also higher, but it is store stock and females which are going to be hit by a supply decline and demand lift.
Key points
* There has been widespread rainfall across major cattle areas in Queensland.
* Around 40% of the national herd has experienced reasonable rainfall which should tighten supply.
* After Easter, supply could drop, and the EYCI could head towards 600¢ after follow up rain.
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What does this mean?
Cattle prices may have rallied, but are really only back to levels seen late last year. There is plenty more upside if restockers have the confidence to push the market. Follow up rain will no doubt trigger another lift. A widespread autumn break in the south would certainly see the EYCI head towards 600¢.
We will get a good idea of where the market is headed in May, until then we can expect some volatility, but downside seems unlikely.
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