Strong restocker demand has seen the Eastern Young Cattle Indicator reach a record high of 772¢/kg in mid-June, driven by a national cattle herd at 25-year lows and producers looking to rebuild in response to improved seasonal conditions.
While buying activity is expected to continue as long as it keeps raining, NAB Agribusiness economist Phin Ziebell outlined substantial risks for the sustainability of cattle prices amid a global pandemic in the latest NAB Rural Commodities Wrap.
Mr Ziebell said although the strength in the restocker market was high amid improved seasons in many areas, Australia’s cattle market would not remain detached from global impacts.
“With Australian cattle prices moving in the opposite direction to beef prices globally, prices will likely fall once restocker demand is met,” he said.
Demand for Australian beef in three of Australia’s largest beef export markets — South Korea, Japan and China — is expected to remain subdued while the COVID-19 pandemic continues.
Processor capacity is also likely to be unstable if COVID-19 continues, particularly in Brazil and the United States, with US domestic beef supply disrupted by outbreaks at processors.
Overall, agricultural markets have varied, with the NAB Rural Commodities Index recording a slight drop of 3.3 per cent in May.
“Global wheat prices have softened due to a stronger supply outlook, while the domestic basis has fallen in response to the likelihood of a large winter crop off the back of improved seasonal conditions,” Mr Ziebell said.
“NAB expects domestic feed grain prices to continue to soften should favourable seasonal conditions continue.”
Sustained sheep prices are near record highs on restocker demand and improved seasonal conditions and the National Trade Lamb Indicator remains in the high 800¢/kg range.
“Ongoing weakness across fibres, sugar and more recently dairy, a function of weak global demand fundamentals and a largely recovered Australian dollar, is concerning,” Mr Ziebell said.
“Cotton prices remain under pressure and the wool market is in dire straits with the Eastern Market Indicator sitting at $11.10/kg.
“Global Dairy Trade auctions results have been mixed in US dollar terms, with the higher Australian dollar putting pressure on local prices, although prices are generally reasonable given global events.”