Global processing demand drives cow indicator

Queensland-cattleDemand for manufacturing beef has overtaken female cattle supply as the major driver of prices, with the eastern states medium cow indicator rising to its highest level since 2016.

On Tuesday the eastern states medium cow indicator rose to 247.25¢/kg live weight (lwt), the highest it has been since 2016.

The strength of current prices is remarkable when taking into consideration the severe drought that has resulted in high levels of female cattle slaughter seen during the past 12 months.

Some of the top prices for medium cows include 264¢/kg at Wagga on Monday, 278¢/kg at Roma and 255¢/kg lwt at Shepparton on Tuesday.

From the beginning of 2007 to the end of 2014, the eastern states medium cow indicator averaged 131¢/kg live weight (lwt). From 2015 to 2018, the indicator rose to an average of 214¢/kg and since June 2019, the indicator has risen again to an average of 222¢/kg lwt.

Seventy per cent of cows sold though saleyards have been purchased by processors in 2019, predominately destined for overseas markets.

This means that while domestic competition is important, it is the global demand that is ultimately driving the medium cow indicator higher as highlighted by MLA at the end of October.

Domestically, it has been processors in Queensland that have been the major driver behind recent growth, with medium cows averaging 251¢/kg lwt on Tuesday, 8¢ stronger than NSW and 9¢ above Victoria.

The most significant change has been in Queensland saleyards, which at the beginning of September were trading at under 200¢/kg lwt, while Victoria was the strongest market averaging 246¢/kg.

There is little evidence to suggest that cows will have any major price declines in the short term, with robust demand for manufacturing beef set to continue.

Also, with supplies likely to tighten in the new year, cow prices should maintain their historically high level and could accelerate further in the event of widespread rainfall.

https://www.mla.com.au/prices-markets/market-news/cow-prices-highest-since-2016/

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