The index dropped 0.7 per cent in April and a further 3.4 per cent in May, reports the NAB June Rural Commodities Wrap.
The benchmark Eastern Young Cattle Indicator is now around 575¢/kg, about half its early 2022 peak.
NAB senior agribusiness economist Phin Ziebell said drier conditions in Queensland combined with constrained processor capacity had heaped pressure on the cattle market and expectations of further dry weather to come have only added downside risk.
“An El Niño event is typically associated with hotter and drier spring-summer conditions across eastern and northern Australia,” Mr Ziebell said.
“We see a typical El Niño event potentially pushing the EYCI below 500¢/kg in spring.
“Lamb prices have fallen roughly 200¢/kg since late January, reflecting similar themes to the cattle decline.
“Wool prices continue to slowly weaken, with the Eastern Market Indicator falling below 1200¢/kg last week. The fundamental problem is that demand is somewhat weaker amid a sluggish Chinese economy.
“We see a risk of ongoing volatility in 2023, with global growth slowing and consumer goods spending likely to weaken further.”
While the Bureau of Meteorology is currently on El Niño alert, indicating a 70 per cent chance of an event forming in coming months, climatic conditions have been mixed.
Mr Ziebell said while much of the continent is drying out, storm activity across Victoria, south-east South Australia and western NSW had seen above-average soil moisture, and Western Australia’s wheat belt is also generally wetter than average.
“Australian wheat prices have seen little change recently, with east coast futures in the high $300/tonne range. We see wheat closing out 2023 at around $350/tonne,” he said.
“Canola prices have now stabilised, albeit substantially below their 2022 peaks.”
