Headwinds mounting for heavy steer
The Snapshot
- Headwinds such as an appreciating Australian dollar and a decline in economic growth impacting red meat demand from key export markets have seen the next four quarters fair value range for the national heavy steer progressively marked down.
- This suggests that there is likely more downside than upside for the national heavy steer over the coming four quarters with the range moving to 260-345c/kg lwt by the second quarter of 2021.
- Improving global economic conditions beyond 2022 and an expected increase in the global beef price fuelled by resurgent red meat protein demand is expected to provide some support to the national heavy steer annual average price.
The Detail
The Episode3 fair value model for the national heavy steer assesses a range of supply and demand factors that have been shown to exert an influence on the direction of finished cattle prices in Australia.
Using forecasts of these influential factors from a combination of key organisations such as the United States Department of Agriculture, International Monetary Fund, Food and Agriculture Organisation and Meat and Livestock Australia we have been able to scenario test the most likely path for the national heavy steer price on both a quarterly and annual basis.
Headwinds such as an appreciating Australian dollar and a decline in economic growth impacting red meat demand from key export markets have seen the next four quarters fair value range for the national heavy steer progressively marked down. As the fair value model range shows the current quarter three level of the national heavy steer at 359c/kg lwt is nearing the upper boundary of the range.
Projecting the fair value range over an annual period for the next four years shows a downtrend in price is anticipated to persist until 2022 with an annual average price expected to range between 250-310c/kg cwt.
Improving global economic conditions beyond 2022 and an expected increase in the global beef price fuelled by resurgent red meat protein demand is expected to provide some support to the national heavy steer annual average price, increasing the fair value range to 270-320c/kg lwt during 2023.