Since early November, prime slaughter values have decreased by an average of 50c/kg. This equates to 300kg carcase weight steer devaluing by $150. In regard to bull prices, it’s a similar situation. These have reduced by around 45c/kg over the same period, translating to a $135 devaluation to a 300kg carcase weight bull.
Evidently, the national bull slaughter price has reduced less severely than prime. This is due to greater fluctuation in the US95CL price. The US imported manufacturing beef market initially faltered in October, strengthened in November, devalued in December, and defied expectations last week by increasing to US$2.34/lb, the strongest price of the 2020-21 season thus far. By contrast, the prime export market has been consistently hindered by a battered international restaurant trade. Until this market recovers, it is difficult to see much upside for prime slaughter prices. However, given the high NZD exchange rate, there are gains to be made if the dollar weakened.
Farmers may be able to catch some slight upside in processing prices from February to March, in the lull between two-year-old and 18-month cattle slaughter, but the real growth often happens from May to October when the supply of finished cattle softens. Based on the five-year average, 119,100 bulls meet the processors in the 21 weeks from May to October, compared to the 310,600 in the same period from October onwards. Based on the five-year average, bull prices improve 30c/kg from May to October, and prime prices increase by 50c/kg. While there is no sign to suggest prices will not pick up in this period, a more stable international situation is required for there to be any real heat at processors.
In the face of softening bull and prime slaughter prices, refreshed pastures levels have renewed interest in store cattle, particularly yearling bulls, and steers. North Island yearling bulls and traditional steers are selling for $2.60/kg and $2.80/kg respectively, and in the South Island these cattle are trading for $2.30/kg and $2.80/kg. Renewed vigour in the store market is an encouraging sign of recovering confidence, but farmers should be mindful where depressed slaughter values will leave their margins, especially as these cattle near the 18-month mark.
