Drought-hit Aussies Finding Heifers Earn More than Steers
AUSTRALIA - Market analysis from during and after past Australian droughts shows that heifers out-perform steers in terms of prices in the months of recovery.
28 April 2015
2 minute read
Meat and Livestock Australia has analysed the average price restockers paid for various cattle categories at the height of widespread droughts and the subsequent recovery in price six and 12 months later.
Six months after the low point of the 2002 drought, average yearling heifer prices increased 46 per cent, and after 12 months, they were up 80 per cent from the low point.
Similarly, during the same drought, yearling steers rose 38 per cent six months after, and were 57 per cent higher than the low point after another six months.
Subsequent droughts follow this trend in 2006 and 2009 – the other major widespread droughts of the past 15 years in Australia.
Two striking consistencies between the three periods were that the national herd declined during the drought, and that female cattle out-performed steers in the recovery. A further coincidence during each of the periods was that the A$ appreciated against the US$.
Taking a look at the current drought phase, the lowest prices paid by restockers were in January 2014, and as happened before, females have lifted greater than steers six and 12 month afterwards.
In this recovery phase, yearling heifers were 21 per cent and 77 per cent higher, while yearling steers were 14 per cent and 50 per cent dearer, respectively.
What’s remarkably different though is that the previous cattle prices rises coincided with contracting offerings.
This time around, the relentless cattle turnoff has not even subsided yet (in fact it has even been higher in some weeks!), and true restocking interest is yet to be ignited.
Additionally, as a result of the high turn-off, the cattle herd is estimated to have contracted much more than in the past, which will exacerbate the effect of tighter supplies when they eventuate.
Adding to the optimism of cattle price potential after the drought breaks are a number of other factors, including the continued depreciation of the A$, which is in contrast to any other post drought dynamic in the last 15 years, and the extraordinary global demand.
It can be difficult to comprehend what may happen when the usual supply and demand fundamentals come back into play, but if history is to repeat itself, once there is a general break in drought conditions and when restockers become more active in the market, heifers are likely to rise greater than steers six and 12 months after.
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