A RENEWED sense of confidence in the grainfed beef sector is driving a wave of infrastructure investment, the likes of which has not been seen for some years.
The trend was in clear evidence at last week’s BeefEx biennial lotfeeding conference on the Gold Coast, where a number of commercial exhibitors were reporting noticeably higher levels of inquiry from feedlot operators.
The investment is being seen in multiple forms, from expansion in pen capacity in some cases, to replacing older equipment and milling infrastructure with newer systems.
Well-known feedlot consultant nutritionist Dr Rob Lawrence told Beef Central there had been a concerning trend earlier, where poor margins in lotfeeding meant operators were resisting spending money on maintenance and equipment upgrades.
“That can only go on for so long, before it starts to impact on productivity,” he said.
This year, however, that had started to turn around, driven both by a measure of confidence in lotfeeding, as well as better profitability among feedyards offering custom feeding services and owner-occupied operations.
It’s not hard currently to find examples of feedlots, large and small, adding (or about to) to their existing capacity. That ranges from smaller lots adding pens for another 1000-3000 head, through to bigger operators with much larger plans.
“I’ve also held discussions with three or four clients just recently looking to upgrade roller mills, and other grain processing infrastructure,” Dr Lawrence said.
“In the initial, stage, the capex trend has come more from custom-feeders, because they have been flat-out this year keeping up with demand for pen space. They are getting increased return, plus they realise that the current level of infrastructure they’ve been relying on just can’t last. But it’s now also including yards feeding their own cattle, exclusively,” he said.
Australian Lot Feeders Association president Don Mackay agreed with the assessment, and used his own yard, Rangers Valley near Glen Innes, to support the argument.
He, like others, sensed that there was a more confident mood among delegates attending this year’s event, than there was at BeefEx two years ago.
“There is profitability in the system again,” he said. “The margins are there this year, and stakeholders have done a little better than they did earlier.”
“Our own business is investing additional capital – about $6 million in additional capacity, taking Rangers Valley’s built pen capacity out to about 34,000 head, as well as a feedmill redevelopment and associated infrastructure,” he said.
Beef Central asked Mr Mackay whether there was a risk of the feedlot sector becoming less efficient because of the tendency to ‘get by’ on aging equipment and technology, rather than upgrade, because of low profitability over the previous few years.
“I don’t think it had quite got there – but equally, in an industry like ours, where component costs are continually rising, you have to find ways to be efficient. And there are new and improved ways of efficiently feeding cattle.”
“The industry has to find those ways and invest that capital. Without it, we start to fall behind, and run the risk of losing competitiveness against other grainfed exporting countries.”
“The other factor is that, quite rightly, the lotfeeding sector is a heavily-scrutinised intensive industry. That means you have to have the systems and equipment that allows the industry to do the things it needs to do to deal with animal welfare, environment and myriad other issues.”
“You can’t not do them. That means having the best equipment, and expending the capital that’s required to do that. Otherwise costs rise, unless capital equipment keeps up.”
Big upgrade happening at Yarranbrook
Another perfect example of the mood for investment in infrastructure development seen at BeefEx came from John Dee’s John Hart, who outlined details for the company’s Yarranbrook feedlot near Inglewood, which is undertaking a substantial upgrade.
The feedlot will double in size from current built capacity around 12,000 head SCU (a mix of export and domestic weight cattle, both retained and custom-fed) to its licensed capacity of 25,000 head.
That expansion will happen incrementally, in stages, and will be used for both custom and company-owned cattle. EU accreditation is also on the horizon, making this the biggest investment seen at Yarranbrook in probably 20 years.
The expansion has also seen John Dee commit to a brand new Roto-Mix mixing unit, a US-built machine considered by most to be the ‘Rolls Royce’ of feedlot mixers.
“It is replacing a very old machine, which we scratch-built ourselves about 20 years ago,” Mr Hart said.
While the old mixer will be retained as a back-up unit, the new Roto-Mix will be the feedlot’s front-line machine.
Mr Hart said while the order was not placed back when the A$ was above 104c, they had still locked-in well before the recent currency decline, which would have added considerably to the cost of the fully-imported machine.
Not only would the new unit be more reliable, but mixing efficiency and performance in most recent designs was ‘absolutely critical,’ he said.
The new Yarranbrook unit was on display at Roto-Mix’s display at BeefEx, just 24 hours before it went into action in the feedlot’s delivery laneways.
It was fitted with latest Digi-Star remote wireless feed management software, and might include some of the newer technologies available to eliminate the human-error factor in batching feed.
Plenty of back-orders evident
Roto-Mix’s Australian distributor Stuart Judd said his company had had a number of other orders placed for new machines this year, as confidence and profitability had turned around in the industry.
“Wambo Cattle Co is waiting on a new truck, as is Lloyd Pastoral at Wieambilla feedlot, Chinchilla,” he said. “In NSW, Tony Fitzgerald will shortly take delivery of a new unit at Elders Killara.”
“A lot of yards have been in a holding pattern on expenditure, because of the financial state of the industry. Equipment has done a lot of hard work, and become a bit run down, but profitability up til now has not allowed them to invest in new equipment, for the last couple of years,” Mr Judd said.
The high demand for beef, the dollar, and the dry weather to go with it had seen the financial position improve this year. The high occupancy levels this year had also put a lot of older equipment under pressure, but that was now starting to turn around.
“Everybody who has called about a new feedtruck in the past six months has wanted it next week,” Mr Judd said. “At any one time, we’ve had four to six trucks and mixers on order at any one time, for the past 12 months.”
To put the investment into some perspective, a fully kitted-out 920 23 Cu M Roto-Mix on a Kenworth platform will set the Australian buyer back between $300,000 and $450,000, depending on requirements. The bigger end of the model scale is where the deepest demand has been this year.
“The biggest problem with the imported equipment with the easing dollar is that it’s made people who’d been contemplating making a purchase wish they’d done it earlier,” Mr Judd said. “It’s shifted close to 10 percent.”
Latest versions of the Roto-Mix feature staggered-paddle rotor designs, producing more efficient and faster ration mixing. That was developed primarily for US feedlots feeding rations containing more heavy distillers grains, but has application also in a conventional feedyard ration.
Another trend in the Australian market is more vertical mixers, which is a clear reflection of the amount of Wagyu feeding going on, where rations contain a much higher percentage of roughage, which vertical mixers are best equipped to handle.
Demand for verticals had gone up tremendously, Roto-Mix’s Kelly Wattman told Beef Central.