Market Morsel: Still Pre-mium
Market Morsel
Australian Heavy Steer spreads to US equivalent (US Choice Fed Steer) is still sitting at a premium on annual average price basis. 2022 is a nearly at a US 20 cent premium, although it has halved from the near 40 US cent premium seen in 2021.
Although it is a far cry from the 150+ US cent discount seen in 2014 drought. Indeed, the annual average price spread in US cents/kg has fluctuated between a 39 US cent to 81 US cent discount for 27 of the last 33 years and has averaged a 61 US cent discount since 1990. Drought conditions beginning in 2013 saw the spread discount widen beyond 100 US cents, reaching nearly 170 US cents on an annual average basis in 2014, before moving to a 123 US cent discount in 2015.
Analysis of the Heavy Steer spread to Australian slaughter levels on an annual basis highlights tight domestic supply helps push us into premium territory, while historically higher slaughter levels, toward 9 million head per annum, help to widen the discount spread. MLA are forecasting annual slaughter in 2022 of 6.65 million head, which (based on the line of best fit on the scatter plot) suggests the spread premium will continue to narrow and perhaps head back to a discount as the season progresses.
