Mid-lockdown wasn’t pretty for the beef industry and led to some poor returns for anyone who had to offload cattle that were too light to kill.
North Island R2 bulls were barely getting more than $2/kg while steers settled to around $2.50/kg. These days both have shot up to about $3/kg, underpinned by the drought breaking, lifting schedules, wait times at processors improving and less anxiousness around covid-19 as a whole.
The halfway mark for winter is behind us, gradually shifting attention to what the spring cattle markets might bring.
Focusing on the here and now it appears store cattle prices are approaching the maximum we can expect for winter. One reliable measurement for the strength of store cattle is to compare against schedules. It’s rare for R2 steers and bulls to make more than 55% of schedule in winter, which is barely any different to what is being paid today – 54% for steers and 53% for bulls. That is impressive considering the global beef trade remains sketchy, the big wave of store cattle that has already sold this winter and that most regions have below-average grass covers.
The latter two factors could have an interesting role come spring.
A lot of cattle farmers have jumped the gun with selling to preserve feed, choosing to take the money and run rather than trade in the spring as usual. That will only contract the number of cattle available in a few months’ time.
The potential for another surge in store cattle interest remains, though. Plenty of areas such as Hawke’s Bay destocked heavily through the drought and a standard spring flush will force a lot to buy in before feed quality deteriorates. Some buyers have tried to get ahead of the game, hence the latest set of price increases, but are often after short-term cattle that might be slaughtered before spring is even finished.
For simplicity’s sake we’ll assume all of the above balances itself out and buyers pay a normal amount relative to schedules in spring. Using AgriHQ’s data and forecasts that would put a 300-350kg yearling beef steer in the North Island at $1000-$1200 ($3.35/kg) and the same weighted bulls and heifers at $900-$1050 ($3/kg).
That is all quite logical but often reality doesn’t follow logic. There have been more than enough instances of traders using cash from prior stock sales as a basis for budgeting or simply paying whatever is needed on the day to secure tallies. If anything, that sort of attitude will push the above prices higher.
Increasingly, there’s two sets of buyers – those willing to fight for quality cattle and those more focused on keeping costs down. That has created a split market at the yards lately and its likely to be intensified in spring given the much larger portion of lighter, drought-affected cattle that will be available versus usual. That is particularly noticeable on heifers but is becoming similar for bulls given the amount of Jersey-blood that is increasingly seeping into Friesian lines.
