Minding the gap

Livestock | 7th October 2024 | By Matt Dalgleish

Market Morsel

It has been over a year since we took a look at price spreads between Australian and US cattle, the last time was September 2023. At this time last year the spread between Australian and US heavy steer prices had widened to the largest discount on record. Fast forward to October 2024 and we can see that not much has changed in US cattle pricing, as they are still experiencing herd liquidation, tight cattle and beef supplies, and very high historic pricing levels.

Indeed US heavy steer pricing has been climbing through September and sits at around 412USc/kg lwt presently, which equates to about 610 cents per kilogram on a live weight basis in Australian dollars. Meanwhile, much has changed for the Australian Heavy Steer with prices much stronger than the lull seen during the end of 2023. In Australian dollar terms the Heavy Steer sits at about 320 cents per kilogram (lwt), which translates to around 220USc/kg.

In percentage price spreads the Aussie Heavy Steer remains at a price discount to the US equivalent, but this isn’t an uncommon occurrence as the long term average percentage spread sits at a discount of about 30%. Historically, since the late 1990s the “normal” range in the spread has fluctuated between a discount of 10% to 45%, as demonstrated by the grey shaded area on the chart shown below. This shaded area represents one standard deviation in the variance of the spread historically above/below the long term average spread discount of 30%, or another way to look at it is that it is the boundary where the spread has traded for around 70% of the time historically speaking. Currently the spread of Australian to US cattle prices sits at a discount of 45% so it is sitting at the bottom of the “normal” range.

However, the seasonal spread chart (below) shows that often during the September/October time frame the spread discount tends to narrow. Indeed as the 2024 seasonal trend highlights we have seen the spread narrowing since June 2024 but as it is coming back from a rather heavily discounted base earlier in the year (circa 60% spread discount in January 2024) it is taking some time to move back into the “norma” range when measuring on a seasonal basis.

Tags

  • Cattle
  • Beef
  • Prices
  • Spreads
  • USA