National Australia Bank, Media Release, 25 March 2021
Solid rainfall across many previously dry areas of Queensland over the last two weeks is expected to spark a short-term resurgence in young cattle prices, as many producers turn from sellers to buyers.
In NAB’s March Beef in Focus Report released today, the bank’s forecast for the Eastern Young Cattle Indicator (EYCI) has been revised up slightly to 850c/kg for Q2 of 2021 on the back of recent rain.
Since the eastern states’ drought broke in early 2020, the EYCI has experienced an extraordinary turnaround. It closed out 2019 at 482c/kg, but cracked 700c/kg in late February 2020, 800c/kg in October and peaked at 888c/kg last month, nearly doubling over a 14-month period.
NAB Agribusiness Economist, Phin Ziebell, said the forecast lift in the EYCI is not expected to be permanent, with flooding, particularly in New South Wales, likely to see some movement constraints.
“While we have now revised up our forecast in response to recent rainfall, we still see risks as largely on the downside, and expect to see the EYCI fall to around 600c/kg by Q1 of 2022,” Mr Ziebell said.
“Somewhat more concerning is the rapid appreciation of Australian cattle prices compared to international peers. Australian steer prices tracked reasonably closely to key South American indicators until around 2015, when the 2016-17 seasonal bonanza saw the first big uptick in Australian cattle prices.
“Since then, Australian prices have become out of step with our peers, with heavy steers now almost double their South American equivalents. While we have no real difficulty moving Australian beef in key markets, our price competitiveness is a key challenge.”
NAB Queensland Agribusiness Customer Executive, John Avent, said the welcome autumn rain across Queensland’s beef production regions would move the dial for some producers after La Nina failed to deliver in many key areas over summer.
“While the three-month rainfall outlook for the state is wetter than average, challenges for the Queensland cattle industry are not over,” Mr Avent said.
“We’re mindful that the benefits of this month’s rain are not guaranteed to make up for the summer rainfall deficits that many producers experienced.
“With the national cattle herd so depleted, it will be an ongoing challenge to restock and we know herd rebuilding will take considerable time.
“Meat & Livestock Australia (MLA) data puts the herd at 24.6 million in June 2020, the lowest level since 1993, and estimates from the Australian Bureau of Agricultural and Resource Economics (ABARES) are lower again. MLA and ABARES differ somewhat in their herd forecasts, with 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.”
Listen to NAB’s latest Agri View Podcast with Phin Ziebell and NAB’s Rockhampton-based Business Banking Executive, Darren Kuhl and Agribusiness Manager, Georgia Colley, on the beef outlook here.
NAB is a major supporting partner of Beef Australia 2021 in Rockhampton from 2-8 May, and its Agribusiness team will be on-site throughout the week.
Read NAB’s March Beef in Focus Report here.
