Analyst Intel

13 November 2020

PULSE | Grass lifts demand for yearling steers

A belated grass market has kicked into gear in the North Island, stimulating what had been a very subdued cattle store market. Farmers – particularly those in Northland and along the east coast – spent a large portion of this year concerned by below average rainfall and poor feed levels, but warm, wet weather is now promoting spring grass growth which has buoyed cattle prices in the past two weeks.

Before grass growth motivated buying, a cautious market limited demand for yearling cattle and prices were undercooked. North Island prices have shown some recent recovery, however these prices are still well below the values of past years. By contrast, the South Island does not have a grass market to lift prices, and a downward trend is evident.

Yearling steers were particularly in low demand earlier this spring. Demand for these cattle is growing, but prices have a long way to recover. In the North Island, 350kg yearling steers are selling for 90c/kg less in the paddock than they were at this time last year ($4.00/kg to $3.10/kg).

South Island 300kg steers are selling for an average price of $2.80/kg in the paddock, which is a whole $1/kg less than this time last year. While last year’s prices were exceptional across the board – given the high slaughter prices – North and South Island yearling steers are selling for 42c/kg and 61c/kg less respectively, when compared to the five-year average price for the same week. 

Stronger competition for yearling steers further boosted prices last week. Many sale yards sold yearlings at elevated prices, including Stortford Lodge, where traditional steers 315kg-385kg sold for $3.48/kg.

As processing companies attempt to pullback prices, a more competitive store market may cut into farm gate margins. Throughout October, AgriHQ reported farm gate pricing reductions for all types of slaughter cattle.

In both the North and South Island, prime steers have decreased in value by 20c/kg since the start of October. This coincided with 20c/kg store price reduction for yearling steers in both islands. However, stabilisation of slaughter prices into November is adding a level of support to the store cattle market.

On an average c/kg basis, North Island yearling steer paddock values track at 60.5% of prime slaughter values in the first 10 weeks of the season, and for South Island yearling steers it’s more like 60% of slaughter price. If we apply that to current slaughter prices, 350kg North Island yearling steers would be selling for $3.54/kg in the paddock, and 300kg South Island yearlings would be selling for $3/kg. For context, both North and South Island yearling steers are currently selling for 56% of prime slaughter prices.

Evidently, there is room for growth in yearling steer prices, especially as processors are reporting satisfaction with prime schedules due to strong retail interest from international markets ahead of Christmas. What was a buyers market could swiftly turn into a vendors market, especially for those trading cattle which were bought at depressed prices earlier in the year. However, not everyone has the same confidence to buy, and some farmers are prioritising making supplementary feed over taking on new stock. Because of this, there may be less buyers in the market in some areas and softening summer store prices could eventuate in these regions.

Sarah Friel