While current heavy steer prices are showing the signs of a difficult season, they have not returned to the lows seen in previous dry times.
Despite being low compared to prices from 2015 onwards, before that the market had never seen prices as high as 425¢/kg cwt, which was the lowest point during this drought.
This new floor in the market is providing support for young cattle prices, despite current forecasts showing no strong indication of improved conditions in the short-term.
One way to gauge the impact a bad, or good, season is having on the market is through the correlation between finished cattle and young cattle prices.
An indicator of the severity of any sustained dry period is the price correlation between finished cattle and young, predominantly restocker cattle.
In a good season, with feed on hand, well-conditioned slaughter ready cattle are more plentiful and competition among processors would typically be lower than that among restockers.
Conversely, during dry periods there is reduced demand for light cattle, increased difficulty finishing cattle and very few producers seeking to restock or increase stocking rates.
Since 2000, the Eastern Young Cattle Indicator (EYCI) has traded at a 5% premium to the heavy steer indicator, with the particularly dry times in 2002-03, 2007-08, 2013-15 and 2018-19 noticeable for their swing towards a heavy steer premium.
However, for the last twelve months, the finished steer market has been stronger by an average of 6%, with the difference reaching 12% in March, a level not seen since 2002. On Tuesday, the 39¢ premium was reached.