A little too heavy – Episode 3

Market Morsel

The National Heavy Steer indication simply slipped under 300 cents/kg today and presently trades at 290c/kg lwt. That corresponds to an almost a 40% slide from the peak prices seen last in 2015 of nearly 470c/kg. While the Aussie heavy guide market has actually been under substantial pressure over 2023 the U.S.A. are seeing livestock rates for comparable massacre prepared livestock (United States Option Fed Guide) near record highs.

A conversion of Australian Heavy Steer to USc/kg puts the regional guide at around 190US cents per kilo with an Aussie dollar presently trading around 65.5 USc. On The Other Hand the United States Option Fed Steer is simply coming off its 396US cent peak from late April. Presently the United States Option Fed Guide relaxes 385US cents a kilo on a live weight basis. For those that require aid with the conversion to regional prices that corresponds to almost 590 Aussie cents a kilo, blowing the doors off our “peak” prices seen last season.

The big discount rate that has actually opened in between United States and Aussie heavy guides has actually pressed the spread discount rate in between the 2 livestock types towards 51% today, which is now beyond the regular variety in spread we generally see in between Australian and United States Heavy Steers. Given that 1998 the Aussie to United States Heavy Steer spread has actually varied in between a 10% to 45% discount rate for 70% of the time, so that is quite representative of the “regular” variety.

The last time we saw spread discount rates of this magnitude was throughout the 2014/15 dry spell when the spread weakened to almost 60%. Even the 2019 dry spell just saw the spread broaden to a 39% discount rate. Simply for context the long term typical spread for the Australian Heavy Steer to it’s United States equivalent sits at around a 28% discount rate.

A take a look at the seasonal spread chart shows simply how uncharacteristic the existing wear and tear in the spread is currently. Typically, the seasonal pattern from June to October is for the infect narrow so here’s hoping that the scenario starts to enhance for regional livestock manufacturers quickly. In my mind existing prices for Aussie Heavy Steer isn’t truly reflective of the prices we are seeing at an international context and appears a bit underestimated, especially provided we are not experiencing any genuine dry spell effects currently.

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