The Eastern Young Cattle Indicator (EYCI) has passed the 900 cents a kilogram mark for the first time in history.
The EYCI closed yesterday at 901.75 cents per kilogram carcase weight, almost 200 cents up on the same time last year.
The indicator is used as a general benchmark of young cattle prices nationally and has been on a steady rise since drought-breaking rains in New South Wales and Queensland early last year.
That dramatic change in fortunes for cattle producers has created extraordinary demand and extremely limited supply.
A long time coming
Matt Dalgleish, manager of commodity market insights at Thomas Elder Markets, said there had been a sense of inevitability that the 900-cent mark would be passed at some stage.
"That, combined with the lowest national herd in 30 years, has really got the rocket under young cattle prices."
Mr Dalgleish said he believed the EYCI was nearing a ceiling.
"I suspect [at] around that 920 to 930 cents level we will start to get some real resistance," he said.
"Because people are going to look at this and say, 'It's just not economical to buy young cattle at those levels' and hope they're going to turn a profit.
Pressure on processors
High cattle prices are also putting extraordinary pressure on the processing sector, which Mr Dalgleish said was trading at a loss.
"For processors, it's a very difficult time and the models show they've been losing in excess of $300 per head slaughtered," he said.
Patrick Hutchinson is chief executive of the Australian Meat Industry Council.
He said the herd rebuild phase, and hence high prices, could continue for another 12 months, and that would be devastating for processors.
"The processing industry in Australia is under historically immense strain — taking into consideration COVID-19, soft export demand, the Australian dollar, and our inability to be able to access labour," Mr Hutchinson said.
"One of those things happening is a massive impact on our businesses.
"This will be one of the hardest, if not the hardest, years on record for the Australian red meat and pork processing industry."
A correction looms
Periods of high commodity prices are almost always followed by corrections and periods of lower prices.
Mr Dalgleish said that would happen in the cattle industry, but not in the short-term.
"I think there are enough demand fundamentals that it won't be a cattle market crash," he said.
Mr Dalgleish said at some point Australian cattle prices would fall closer to international prices.
"The fact that we do have the most expensive cattle in the world, that's another factor weighing on the price."
