Saturday, December 9, 2023

Store market resets as weather improves

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Along with calmer weather, the store market has reset to the point where it can be usefully assessed for pointers the season ahead.
Summer lamb buyers are often choosing to do fewer trades, instead taking lambs to heavier weights to reclaim a margin. This may have flow-on effects further into autumn.
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It’s been a game of two halves when it comes to this year’s store stock markets. In one corner you’ve had the North Island, where lots of rain has translated into lots of grass grown, sending the market into a buying frenzy over what’s been available. In the other is the South Island where it’s been the exact opposite, especially down south, with another dry season placing all the power with the buyers.

But all weather patterns come to an end eventually. La Niña, which was driving these trends, has slowly disappeared going into autumn and put the country in a more neutral state. Which is another way of saying the sun and the rain have been more evenly dispersed across the country and should stay that way for a little while longer yet.

The above, and a few cold mornings, have somewhat reset the store market in the past few weeks, which makes it a good time to assess how strong prices are and whether what we should expect going forward.

When it comes to lamb, the store market in both Islands is paying 47-48% of schedule. For the North Island, that’s about typical for this point in the season, bar April 2020 when covid and drought made for a tough time for sellers. 

The main difference is this usually this comes after a summer where lambs are relatively affordable, which was nowhere near the case this time around. Summer lamb buyers are often choosing to do fewer trades and are instead taking lambs to heavier weights to reclaim a margin. This may have flow-on effects further into autumn if they’re out of the market. 

This probably won’t warp prices to a massive extent, though, since lamb liveweights are above average, which will push a larger portion of lambs directly into the slaughter system rather than being routed through the store market first.

The short-term outlook for the South Island is stronger. Current pricing is a little higher than would usually be expected. But with a lot of vendors selling early due to the dry summer, winter croppers have little choice but to compete over the few lambs that are yet to come up for sale. At least one slaughter contract for late-autumn/early-winter has been released, too, which is injecting a bit of confidence into the market.

When it comes to R2 straight-beef steers, the money for sellers is looking tidy when married up next to schedules. Even with the recent weakening in the North Island market, R2 steers are the strongest they’ve been at this point in the year for five years at 56% of schedule. Again, this comes after an extended spell where R2 cattle have been much less affordable than usual. So while there may not necessarily be a big change in prices going forward, this makes it even more likely that prices will settle down further as we approach winter, something which is fairly standard through autumn.

It’s all quite similar in the South Island, where prices have been solid versus returns at slaughter, which will likely translate into a relatively normal run into winter for the store market – especially as good-quality straight-beef cattle have been hard to find for a while now, at least outside of calf sales where the market’s been strong as well.

This article was written by AgriHQ analyst Reece Brick. Reece’s reports provide key insights into what makes our sheep and beef markets tick. Subscribe to AgriHQ reports here.

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