october 2016 cattle outlook and 101 cattle forwards
TRANSCRIPT
![Page 1: October 2016 Cattle outlook and 101 Cattle Forwards](https://reader033.vdocuments.site/reader033/viewer/2022042722/589e9b9b1a28ab9f728b6651/html5/thumbnails/1.jpg)
MLA cattle outlook and 101 cattle forwards20th October 2016
Presented by: Ben Thomas, MLA & Matt Dalgleish, Mecardo
![Page 2: October 2016 Cattle outlook and 101 Cattle Forwards](https://reader033.vdocuments.site/reader033/viewer/2022042722/589e9b9b1a28ab9f728b6651/html5/thumbnails/2.jpg)
Before we start
» Presentation is content rich – Charts and Figures.
» Charts will be used to show trends and tell a story don’t get too caught up on the details.
» Relevant information for strategic long-term decision making.
![Page 3: October 2016 Cattle outlook and 101 Cattle Forwards](https://reader033.vdocuments.site/reader033/viewer/2022042722/589e9b9b1a28ab9f728b6651/html5/thumbnails/3.jpg)
Ben ThomasManager, Market Information
Matt DalgleishSenior Market Analyst
Andrew WhitelawGrain Analyst & Manager, Business
Development
![Page 4: October 2016 Cattle outlook and 101 Cattle Forwards](https://reader033.vdocuments.site/reader033/viewer/2022042722/589e9b9b1a28ab9f728b6651/html5/thumbnails/4.jpg)
Mecardo – Cattle Market UpdateOctober 2016
Ben Thomas – Manager, Market Information
![Page 5: October 2016 Cattle outlook and 101 Cattle Forwards](https://reader033.vdocuments.site/reader033/viewer/2022042722/589e9b9b1a28ab9f728b6651/html5/thumbnails/5.jpg)
From dust to deluge
![Page 6: October 2016 Cattle outlook and 101 Cattle Forwards](https://reader033.vdocuments.site/reader033/viewer/2022042722/589e9b9b1a28ab9f728b6651/html5/thumbnails/6.jpg)
From one unprecedented level to another20
0120
0220
0320
04
2011
2012
2013
2014
2015
2016
2018
2019
2020
100000
110000
120000
130000
140000
150000
160000
170000
Source: MLA, rolling 12 month average eastern states cattle slaughter
![Page 7: October 2016 Cattle outlook and 101 Cattle Forwards](https://reader033.vdocuments.site/reader033/viewer/2022042722/589e9b9b1a28ab9f728b6651/html5/thumbnails/7.jpg)
Cattle herd - population changes2015-16 on 2012-13 percentage change
LegendMore than 41%
31 to 41%
21 to 30%
11 to 20%
1 to 10%
0
-1 to -10%
-11 to -20%
-21 to -30%
-31 to -41%
More than -41%
Shaded regions have greater than 20,000 head
2015-16 figures are MLA estimates based on ABS data
Percentage changes are from the national herd peak in 2012-13 (29.3 million head)
Note:
1,256,969
2,114,568781,200
161,0041,346,351
946,306
134,4012,676,644
550,6544
351,194479,409
852,221
704,392838,925127,640638,081555,381732,685115,243
453,066
406,609
227,629
329,814
57,301328,662
98,550291,121452,132
216,250
175,22520,675
28,00386,471
107,568693,162 588,446
152,641383,936
570,641
75,722869,220
362,425431,441
327,163818,357
1,094,022
![Page 8: October 2016 Cattle outlook and 101 Cattle Forwards](https://reader033.vdocuments.site/reader033/viewer/2022042722/589e9b9b1a28ab9f728b6651/html5/thumbnails/8.jpg)
Dashboard of 2016 production changes*
Adult c
attle
slaug
hter
Fem
ale sl
augh
ter
Carc
ase w
eights
-30-20-10
0
year-on-year 5 year
%
Source: ABS
* = January to July
![Page 9: October 2016 Cattle outlook and 101 Cattle Forwards](https://reader033.vdocuments.site/reader033/viewer/2022042722/589e9b9b1a28ab9f728b6651/html5/thumbnails/9.jpg)
Grainfed beef
Grassfed beef
-20-15-10-505
1015
year-on-year 5 year
%
• 10-year average grainfed proportion of production is 36.6%
• Exceeded that in wet years – with more grassfed cattle retained
• 2015/16 grainfed production was 39% - expectations for 2017 are slight reduction, to 38%, on the back of herd rebuild offset by high feeder cattle prices
Dashboard of 2016 production changes*
Source: ABS, MLA estimates* = change from 15/16 fiscal year
![Page 10: October 2016 Cattle outlook and 101 Cattle Forwards](https://reader033.vdocuments.site/reader033/viewer/2022042722/589e9b9b1a28ab9f728b6651/html5/thumbnails/10.jpg)
More US beef, pork and chicken to come
Source: September World Agriculture Supply Demand Estimates
![Page 11: October 2016 Cattle outlook and 101 Cattle Forwards](https://reader033.vdocuments.site/reader033/viewer/2022042722/589e9b9b1a28ab9f728b6651/html5/thumbnails/11.jpg)
Australia vs global beef exports
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022
2024
200
700
1,200
1,700
2,200
2,700
3,200
Brazil Australia India US
‘000
tonn
es c
we
Source: OECD
Forecast
![Page 12: October 2016 Cattle outlook and 101 Cattle Forwards](https://reader033.vdocuments.site/reader033/viewer/2022042722/589e9b9b1a28ab9f728b6651/html5/thumbnails/12.jpg)
Beef to China region* from major exporters
Mar-10
Sep-10
Mar-11
Sep-11
Mar-12
Sep-12
Mar-13
Sep-13
Mar-14
Sep-14
Mar-15
Sep-15
Mar-16
050000
100000150000200000250000300000350000400000450000
USUruguayAustraliaIndiaNZBrazil
Source: Global Trade Atlas, quarterly basis*=Direct shipments from each respective country to aggregated China, Vietnam and Hong Kong
![Page 13: October 2016 Cattle outlook and 101 Cattle Forwards](https://reader033.vdocuments.site/reader033/viewer/2022042722/589e9b9b1a28ab9f728b6651/html5/thumbnails/13.jpg)
Impact of all this on the market…
![Page 14: October 2016 Cattle outlook and 101 Cattle Forwards](https://reader033.vdocuments.site/reader033/viewer/2022042722/589e9b9b1a28ab9f728b6651/html5/thumbnails/14.jpg)
Restockers driving market more than ever
2010 2011 2012 2013 2014 2015 2016200
300
400
500
600
700
800
Feeder Processor Restocker
¢/kg
cw
t 5¢*17¢*22¢*
48¢*24¢*
10¢*
Source: MLAEYCI by buyer type, latest data includes up to 13 September 2016; *= Restocker premium over processor purchases
21¢*
![Page 15: October 2016 Cattle outlook and 101 Cattle Forwards](https://reader033.vdocuments.site/reader033/viewer/2022042722/589e9b9b1a28ab9f728b6651/html5/thumbnails/15.jpg)
US Imported 90CL vs Medium Cow*
1998 2003 2008 20130
100200300400500600700800
Medium CowCow Meat 90 CLDifference
¢/kg
Source: MLA, Steiner Consulting Group*= Medium cows are 400-520kg D3, national average across all NLRS reported saleyards
![Page 16: October 2016 Cattle outlook and 101 Cattle Forwards](https://reader033.vdocuments.site/reader033/viewer/2022042722/589e9b9b1a28ab9f728b6651/html5/thumbnails/16.jpg)
ConclusionsOn one hand:
• Tightest supply of cattle in 20 years
• Exceptional winter rainfall – set for abundant spring feed
• Restockers have entered the market in force
But on the other:
• Global beef prices have softened from the highs of 2014 and 2015
• US production and competition is on the rise
• Brazil continues to push more beef into China
• A$ strengthened in 2016
![Page 17: October 2016 Cattle outlook and 101 Cattle Forwards](https://reader033.vdocuments.site/reader033/viewer/2022042722/589e9b9b1a28ab9f728b6651/html5/thumbnails/17.jpg)
Disclaimer
Care is taken to ensure the accuracy of the information contained in this publication. However MLA cannot accept responsibility for the accuracy or completeness of the information or opinions contained in the publication. You should make your own enquiries before making decisions concerning your interests. MLA accepts no liability for any losses incurred if you rely solely on this publication.
Information contained in this publication is obtained from a variety of third party sources. To the best of MLA’s knowledge the information accurately depicts existing and likely future market demand. However, MLA has not verified all third party information, and forecasts and projections are imprecise and subject to a high degree of uncertainty.
MLA makes no representations and to the extent permitted by law excludes all warranties in relation to the information contained in this publication. MLA is not liable to you or to any third party for any losses, costs or expenses, including any direct, indirect, incidental, consequential, special or exemplary damages or lost profit, resulting from any use or misuse of the information contained in this publication.
Care is taken to ensure the accuracy of the information contained in this publication. However MLA cannot accept responsibility for the accuracy or completeness of the information or opinions contained in the publication. This information is not medical advice and you should consult a health professional before making any decisions concerning your interests
![Page 18: October 2016 Cattle outlook and 101 Cattle Forwards](https://reader033.vdocuments.site/reader033/viewer/2022042722/589e9b9b1a28ab9f728b6651/html5/thumbnails/18.jpg)
Mecardo Market View
![Page 19: October 2016 Cattle outlook and 101 Cattle Forwards](https://reader033.vdocuments.site/reader033/viewer/2022042722/589e9b9b1a28ab9f728b6651/html5/thumbnails/19.jpg)
Short term correction levels
![Page 20: October 2016 Cattle outlook and 101 Cattle Forwards](https://reader033.vdocuments.site/reader033/viewer/2022042722/589e9b9b1a28ab9f728b6651/html5/thumbnails/20.jpg)
EYCI – 90CL spread forecasts
![Page 21: October 2016 Cattle outlook and 101 Cattle Forwards](https://reader033.vdocuments.site/reader033/viewer/2022042722/589e9b9b1a28ab9f728b6651/html5/thumbnails/21.jpg)
EYCI longer term forecasts
![Page 22: October 2016 Cattle outlook and 101 Cattle Forwards](https://reader033.vdocuments.site/reader033/viewer/2022042722/589e9b9b1a28ab9f728b6651/html5/thumbnails/22.jpg)
EYCI long term forecasts
![Page 23: October 2016 Cattle outlook and 101 Cattle Forwards](https://reader033.vdocuments.site/reader033/viewer/2022042722/589e9b9b1a28ab9f728b6651/html5/thumbnails/23.jpg)
What are forward contracts & how do they work?
![Page 24: October 2016 Cattle outlook and 101 Cattle Forwards](https://reader033.vdocuments.site/reader033/viewer/2022042722/589e9b9b1a28ab9f728b6651/html5/thumbnails/24.jpg)
Overview of a forward contract
» Commitment to deliver a certain amount of a product within a certain time period.
» Settled through cash or physical delivery» Used to reduce price risk» Lock in price components in advance of
trading the physical product» Works in conjunction with trading the
physical product by locking in the overall price received for the product
![Page 25: October 2016 Cattle outlook and 101 Cattle Forwards](https://reader033.vdocuments.site/reader033/viewer/2022042722/589e9b9b1a28ab9f728b6651/html5/thumbnails/25.jpg)
Current forward products
» Direct forward contracts (tailored)» Auctions plus forward contracts
(tailored)» Riemann forward contracts
(standardised)
![Page 26: October 2016 Cattle outlook and 101 Cattle Forwards](https://reader033.vdocuments.site/reader033/viewer/2022042722/589e9b9b1a28ab9f728b6651/html5/thumbnails/26.jpg)
Riemann Cattle
» Cattle – cash settled against EYCI– 4,000 kg minimum contract with 1,000 kg
increments– Maturity dates are the second and fourth
Thursday of the first six months with maturity dates set against key saleyard selling days, and then every fourth Thursday per month for the next 18 months
– http://www.riemann.com.au/wp-content/uploads/2016/03/Riemann-Cattle.pdf
![Page 27: October 2016 Cattle outlook and 101 Cattle Forwards](https://reader033.vdocuments.site/reader033/viewer/2022042722/589e9b9b1a28ab9f728b6651/html5/thumbnails/27.jpg)
Why use a Riemann forward contract
» Helps to mitigate price risk» Licenced and regulated marketplace» Independent and transparent market for
buyers and sellers» Producers, processors and investors have
easy access to risk management tools» Participants not subject to margin
requirements
![Page 28: October 2016 Cattle outlook and 101 Cattle Forwards](https://reader033.vdocuments.site/reader033/viewer/2022042722/589e9b9b1a28ab9f728b6651/html5/thumbnails/28.jpg)
How does it differ from a physical delivery contract
» Not settled by physically delivering cattle to the buyer
» Cash settled against the EYCI» Therefore, at time of settlement the
difference in price of the EYCI must be paid by either the buyer or seller
![Page 29: October 2016 Cattle outlook and 101 Cattle Forwards](https://reader033.vdocuments.site/reader033/viewer/2022042722/589e9b9b1a28ab9f728b6651/html5/thumbnails/29.jpg)
Example
» The forward contract rate was locked in at 675c
» At maturity if the EYCI is at 660c the buyer must pay the seller the 15c difference
» OR» At maturity if the EYCI is at 680c
then the seller must pay the buyer the 5c difference
![Page 30: October 2016 Cattle outlook and 101 Cattle Forwards](https://reader033.vdocuments.site/reader033/viewer/2022042722/589e9b9b1a28ab9f728b6651/html5/thumbnails/30.jpg)
Example
• John is a cattle producer from Queensland• He is planning to sell 60 head of 500kg heavy
steers in Jan 2017
![Page 31: October 2016 Cattle outlook and 101 Cattle Forwards](https://reader033.vdocuments.site/reader033/viewer/2022042722/589e9b9b1a28ab9f728b6651/html5/thumbnails/31.jpg)
Example
• John is a cattle producer from Queensland• He is planning to sell 60 head of 500kg heavy
steers in Jan 2017
![Page 32: October 2016 Cattle outlook and 101 Cattle Forwards](https://reader033.vdocuments.site/reader033/viewer/2022042722/589e9b9b1a28ab9f728b6651/html5/thumbnails/32.jpg)
Pros and Cons
» Standardised product means increased participants
» Transparent prices » Broad based buyer/seller access» Cash settled» No physical delivery required
![Page 33: October 2016 Cattle outlook and 101 Cattle Forwards](https://reader033.vdocuments.site/reader033/viewer/2022042722/589e9b9b1a28ab9f728b6651/html5/thumbnails/33.jpg)
Pros and Cons
» Standardised product – not tailored to cattle type and exact date of sale
» Spread risk between EYCI and cattle type/location (no different to physical sales)
![Page 34: October 2016 Cattle outlook and 101 Cattle Forwards](https://reader033.vdocuments.site/reader033/viewer/2022042722/589e9b9b1a28ab9f728b6651/html5/thumbnails/34.jpg)
Q&A
Ben ThomasManager, Market Information
Matt DalgleishSenior Market Analyst
Andrew WhitelawGrain Analyst & Manager, Business
Development
![Page 35: October 2016 Cattle outlook and 101 Cattle Forwards](https://reader033.vdocuments.site/reader033/viewer/2022042722/589e9b9b1a28ab9f728b6651/html5/thumbnails/35.jpg)
More information
» Matt Dalgleish [email protected] , 0439 454 557» Andrew [email protected], 0457 054 169» Non-Mecardo subscribers will receive
one month of Mecardo premium access for free