There weren’t a lot of adjustments to variables in Beef Central’s latest regular 100-day grainfed trading budget calculated yesterday, meaning projected profits remain disappointing.

The key influencing inputs – feeder price, ration price and finished steer price – are little changed from our last calculation back on July 3.

Using our chosen set of variables (see full list at base of page), the forecast loss on a flatback steer entering the feedlot yesterday and closing-out after 105 days on feed in November, week one, is $49. That’s down only marginally on a projected $55 loss recorded in this analysis three weeks ago.

It’s a big deficit from a $4 net profit posted on the same exercise calculated back as recently as May 16.

After a series of upwards adjustments in feeder price in recent Beef Central breakevens, we’re deducting 5c/kg this time, to 170c/kg, based on Darling Downs procurement.

There’s evidence of some divergence in the market for feeders at present, with stronger prices evident in NSW (where recent rain and a relatively mild winter has exerted greater influence) compared with Queensland.

A reliable source suggested there was a good 10c/kg split between NSW and Queensland for flatback feeders at present – +180c/kg versus 170c/kg north of the border.

Apportioning a feeder price of 170c/kg in yesterday’s budget values our steer at induction at $765, down $22 on three weeks ago, but considerably improved from a record-low 150c/kg liveweight in our budget ten weeks ago when the steer was worth only $675 due to drought supply pressures.

Ration price unchanged

Ration cost has been retained for yesterday’s budget at $330/t (a record-equalling high for this data-set), partly because this budget is still in the same calendar month as the last, and many custom feedlots adjust ration price by the calendar. The start of a new calendar month often means a new ration quoting period for many sites.

It’s plausible that ration price might start to wane in our next projection, likely around mid-August, however, because new-season crop will start to come into ration calculations, whereas yesterday’s is still based on old-season grain. In theory, some of that price pressure might start to come off, analysts say.

Beef Central’s feedgrain columnist Luke Walker might have more to say on this in his next feedgrain report.

A $330 ration cost applied yesterday represents a total feeding cost over 105 days of $517. This, combined with the slightly lower feeder price, gives a total production cost of $1372, down $26 on last time.

Cost of gain, using our chosen variables (2kg/day ADG, for 210kg gain over 105 days) remains unchanged at 246c/kg. This time last year, the cost-of-gain was around 200c/kg on a $280/t ration price, and a feeder price of 200c/kg.

The variables outlined above deliver a breakeven figure in yesterday’s budget of 389c/kg – a 7c/kg decline from our last calculation three weeks ago

Forward pricing

Current forward public grid prices for 100-day ox from Southeast Queensland processors for October, week three, have drifted a little since our last calculation. Public quotes obtained yesterday were around 375c/kg dressed, down 5c on our July 3 quote.

That’s due mostly to the continued high flow of western and northern cattle into Queensland feedlots, as there is no real sign of a seasonal turnaround from earlier this year, meaning processors are not having to work quite so hard to secure a grainfed export kill.

Reports suggest it would still be hard to find pen space in any reputable Queensland feedyard at present, as drought pressures continue. Close-out pens are inevitably re-filling overnight, as making more space for weaners still looks a pretty good strategy for many western and northern cattlemen.  

The variables outlined above deliver a $49 loss on our trading steer, only marginally better that the minus-$55 result see three weeks ago.  

So where is the break going to come from in order to push grainfeeding profit back in the right direction: lower feeder price, lower grain/ration price, higher slaughter steer price, or a combination of the above?

The strength of the meat market, riding the wave of a dramatically lower A$ currency value, perhaps provides the best prospect, along with an adjustment for new season grain. Some large supply chain stakeholders are saying the forward price November delivery should be 400c/kg minimum – not 375c.

Even if processors are getting only half of the 15pc advantage seen in currency value (sharing the other half with their export customer), current pricing on grainfed export stock was ‘unrepresentative’, a contact complained.

A processor contact this morning, however, suggested current 100-day kills at a procurement price of 370-375c are still only a breakeven proposition.   

Looking retrospectively at 100-day flatback cattle that went on feed back in April for slaughter this week, forward-contract meatworks rates then were around 360c/kg. That’s line-ball with where the southeast Queensland processor grid spot market is today, at 360-365c. On that basis, processors buying those cattle forward were all-square, to perhaps $15 better off than if they had bought those same cattle out of yesterday’s spot market.

What about Indicus steers, cows?

Before finishing this report, let’s look briefly a couple of other descriptions occupying Queensland feedlot space at present.

Public pricing on higher indicus feeder steers suitable for 100-day programs range from the mid-130s to low-140s, based on one large Darling Downs feedlot’s quotes yesterday.

The breakeven on those steers, bought at 140c/kg – all other variables remaining the same for simplicity – would be 350c/kg. Selling those steers at say, 365c (10c discount off flatbacks), would represent a ‘solid margin’ of perhaps $50-$60 a head.

Feedlots, of course are subject to customer requirements and quality specs, meaning they may be limited in their ability to rush out and simply replace flatback feeders with cheaper Indicus steers. Equally, in some cases these cattle might not perform as well in the feedlot, or fail to meet costumer grid eligibility.

But there are undoubtedly a percentage of feedlot operators that are likely to be going hard on those type of cattle presently.

Reports continue to circulate of cull cows being placed onto feed for short periods, typically 40-50 days, and mostly by vertically-integrated corporates and large privateers.

At a rate of gain of 2kg/ day or better on many cows, that presents on opportunity to get carcase weights up into higher ranges, and escape some of the price penalties evident on lighter cow grids.

One SEQ processor grid scrutinised yesterday had cows +300kg on 265c; +280kg 260c; +260kg, 255c; +240c, 250c, but dropping off more savagely after that.

But looking at a 200kg carcase weight cow worth 230c/kg is still only worth $460 delivered SE Qld. Ex farm price on some of those cows could be $300.

But putting 2kg/day on a cow over 50 days in the feedlot is still a relatively tough trade, based on Beef Central’s formula. A ‘feeder’ 400kg cow worth say, 100c/kg liveweight, produces a breakeven after 50 days on grain at around 280c. That’s still 20c/kg behind the current grid price, but the primary advantage is seen in ‘staying long’ on cattle, when there is some upside evident in the cow market, and avoiding some of the grid pricing discount penalties seen on lighter cows.

Apply the formula over a real light store condition cow, which currently could be worth only 60c/kg liveweight, and it looks a cracking proposition, with a breakeven around 210c/kg after 50 days.

Such decisions to feed cows are often part of an overall corporate strategy to sell more kilos of beef.  

• Beef Central's regular 100-day grainfed breakeven scenario is based on a representative standard set of production variables, ex Darling Downs. They include a 450kg liveweight feeder steer fed 105 days; 356kg dressed weight at slaughter; ADG of 2kg; consumption 15kg/day and a NFE ratio of 7.5:1 (as fed); $25 freight; typical implant program. Bank interest is included. It is important to note that variations exist across production models (feed conversion, daily gain, mortality, morbidity, carcase specification); from feedlot to feedlot; and between mobs of cattle. For a more specific performance forecast on a given mob of cattle, consult with your preferred custom feeder.