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Feedlots again starting to fill, as dry weather bites hard

by Jon Condon, 03 March 2017

FEEDLOTS offering custom feeding services for clients are reporting elevated inquiry from producers over placements during the past few weeks, as dry conditions intensify across large parts of Queensland and NSW.

And Darling Downs agents report a waiting list of three to four weeks for sale of feeder cattle to some downs feedlots, as more yards fill up under seasonal pressure.

Wainui feedlot aerial

Queensland yards are starting to fill up, as drought conditions intensify

Attention will now focus on the December quarter feedlot survey results, due out early next week. While those results may now be a little dated to capture the latest shift in feeding activity, it’s widely anticipated that the result will be well up from the previous September 2016 quarter.

Last year saw a big decline in numbers on feed in the second half of the year, partly due to the arrival of winter/spring rain. Numbers on feed fell from a record just below one million head in December 2015, to less than 790,000 head by the September quarter.

Mort & Co Lotfeeders principal Charlie Mort said he anticipated that March quarter feedlot activity figures (not due for release until May) will be well up, because feeder cattle prices had now fallen $100-$120 or more in three or four weeks, and numbers on feed in Queensland appeared to be on the rise. At the same time, processors had also reduced their offers on grain finished cattle.

Principal of the Smithfield feedlot in Queensland’s South Burnett region, Jason Shearer Smith, said custom-feeding inquiries had started to grow in the past two to three weeks, as weather conditions continued to deteriorate.

The company’s Smithfield yard was now booked out for the next few weeks, and its second Sapphire yard near Goondiwindi was full for several months ahead, he said.

Mr Shearer Smith said the bulk of inquiry for custom-feeding (or feeder steer sale) was coming out of Central Queensland, where conditions were deteriorating badly.

“A lot of people are seeing winter coming, cattle are starting to slip, and in historical terms, cattle are fundamentally still worth good money. Everyone has been talking about cattle prices coming back in 2017, so if they don’t want to go through winter carrying cattle, having to supplementary feed, and potentially face lower market value later in the year, some are starting to look at options,” he said.

Jason Shearer-Smith in the pens at Smithfield

Jason Shearer-Smith in the pens at Smithfield

Mr Shearer Smith said it appeared that some producers were making sale or feedlot placement decisions earlier this year, than they perhaps did in their previous two drought years.

“It’s easy to underestimate just how patchy the season has been in many areas of Queensland,” he said. “Anywhere I have been in the past few months, there’s reasonable feed in one paddock, and bare earth just a few kilometres away. It’s only been patchy storm rain, so while some people may have feed to carry cattle through to slaughter, there are plenty of others who may not,” he said.

Placing cattle on feed would lock-in finished cattle later in the year, when slaughter numbers are forecast to be very scarce.

“Sure, there’s a bigger flow of cattle coming to market right now due to the conditions, but maybe in three or four months when cattle going on feed now would be exiting the feedlot after 100 days, slaughter numbers are likely to be very tight, and prices might reflect that.”

“That’s one reason why custom-feeding inquiry may have lifted recently: producers don’t like the feeder steer price (which has fallen $100-$150 on some cattle), and they are taking a bit of a punt that finished cattle will be scarce when they complete their 100-day program.”

“A 100-day feeder steer has probably gone from a 360 to a 315-320c proposition this year. That’s a conservative decline of $140 on a 400kg feeder. That feeder market is not as attractive as it was earlier, and prompting some thinking about best ways to handle these cattle, in dry conditions.”

Industry attitude to feedlots as a ‘drought tool’

Sandalwood feedlot’s Kev Roberts acknowledged that there was probably growing interest in custom feeding, but said he had no ‘drought area’ cattle in his yard presently, because Sandalwood was now more or less fully subscribed with long-standing, repeat customers, rather than season-driven ‘opportunity’ feeders.

“The primary role of the feedlots in Australia is not to keep starving cattle alive – it is to deliver quality product, 365 days a year to a discerning customer. The whole supply chain has to start thinking along those lines”

“We’ve had no spare capacity since about November last year,” he said.

Mr Roberts says one of the issues that the broader beef industry has to embrace was the view that the feedlot sector was there fundamentally as a ‘drought-feeding fallback.”

“Times have changed,” he said. “Feedlots need to operate at near capacity more consistently to remain profitable – not just as a ‘default’ position for producers when grass gets short in the paddock,” he said.

“We cannot continue to run our businesses as a drought feeding service. The cattle industry in this country has moved-on from that. We’ve had a lot of graziers’ cattle in our feedlot for many years, and are grateful for it. But the cost of doing business has changed – feedlots need to operate closer to capacity to remain viable, through continuity of supply and supply alliances.”

“The primary role of the feedlot sector in Australia is not to keep starving cattle alive – it is to deliver quality product, 365 days a year to a discerning customer. The whole supply chain has to start thinking along those lines, because empty feedlot pens when seasons are good is not sustainable.”

Feeder sale inquiry grows

Dalby-based stock agent Peter Daniel said he had noticed a recent sharp rise in inquiry by producers keen to sell feeders to feedlots, as seasonal conditions deteriorated and weather forecasts showed little sign of change.

He said some downs yards had a three-week waiting period for feeder bookings, and if the pressure was on, the system could fill up quickly.

“Somebody under the pump, through lack of feed or water, who has to wait three weeks for feedlot delivery could be in a very difficult position,” he said. “The same with meatworks access, if the dry continues.”

Mr Daniel said ideally, the slaughter cattle market would “continue to sit somewhere near where it is today.”

“We have to get to a happy medium where both processor and producer can make a dollar. The meatworks have been bearing the brunt of it for a while, although not as long as the producer did earlier. But we need to ensure that plants stay open this year.”

“While feeder cattle prices had retracted significantly this year, anywhere around 320-330c/kg was still very good money for feeders, Mr Daniel said.

“It’s where it needs to be, from the feedlot processors’ perspective, but it’s still not too bad. Compare that to what we were used to up to a couple of years ago, when those same feeder steers were selling for 170c/kg – and thought we were going well.”

“If it stays somewhere near where it is today, it’s reached a sustainable level for all.”

 



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