Growth, inflation and labour market all easing
Autumn rain lifts EYCI outlook in the short-term.
Listen to NAB’s latest Beef Podcast, featuring our Rockhampton-based Business Banking Executive, Darren Kuhl and Agribusiness Manager, Georgia Colley, with NAB Agribusiness Senior Economist, Phin Ziebell.
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Since the eastern states drought broke in early 2020, Australian cattle prices have been on an absolute tear. The Eastern Young Cattle Indicator (EYCI) closed out 2019 at 482c/kg but cracked 700c in late February 2020, 800c in October and peaked at 888c last month. This near doubling over a 14 month period represents an extraordinary turnaround.
While young cattle prices have eased a little since their peak, strong rains across many previously dry areas of Queensland cattle country suggests prices are likely to see at least a short-term resurgence as the herd rebuild continues. We are already seeing signs of this, with EYCI jumping to 878c yesterday.
With the national herd so depleted, rebuilding will take considerable time. MLA data puts the herd at 24.6 million in June 2020, the lowest level since 1993. ABARES’ estimates are lower again. The MLA and ABARES differ somewhat in their herd forecasts, with the MLA expecting a sharper recovery. Any meaningful herd rebuild will put upward pressure on young cattle prices, especially given the herd is at a 27-year low.
Last month, we released cattle price forecasts pointing to downside risk from Q2 2021 on. While we still see risks as largely on the downside, there could be some further buying activity in the short term. We have now revised up our forecasts somewhat, as shown to the right. We now see EYCI at 850c/kg in Q2 2021, but still see it falling to 600c by Q1 2022.
Flooding, particularly in New South Wales, is likely to see some movement constraints, although strong demand has seen considerable stock movement from the north, with tropical breeds now reported with increasing frequency in the state.
For further details, please see In Focus: Beef Cattle March 2021
The NAB Regional & Agribusiness executive & team look forward to catching up with many of our beef customers at Beef Australia 2021 in Rockhampton in May – including a series of information sessions and more.
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