Few things have better captured the tough times experienced within the Australian feedlot sector over the past two years than Beef Central’s fortnightly 100-day trading budget.

There were times when we wondered whether it was prudent to continue to highlight the red ink being written in 100-day feedlot programs across eastern Australia, but like most things, cycles eventually turn, and the industry may be at that point currently.

It is with some relief that we can reveal that Beef Central’s latest feedlot trading budget, using our standard set of variables for cattle entering the feedlot yesterday and closing-out in late January next year, has produced a positive $21 profit result.

The turning point may have come a fortnight of so ago, when it became evident that large southern Queensland custom feedlots like Sandalwood, Smithfield, Lilyvale, Grassdale, Opal Creek, Stanbroke, Wambo and others were starting to induct cattle in greater numbers again.

Numbers on feed appear to be considerably higher than where they were six or eight weeks ago, due to the combination of cheaper feeder price, and forward prices for grainfed ox in a higher band than where they sat earlier.

Additionally, feedback from some of the nation’s sharpest feedlot vets and nutritionists attending both the BeefEx and Australian Wagyu Association conferences on the Gold Coast last week suggests recent feedlot performance has been very strong, due partly to (mostly) stable weather conditions.

A major processor a fortnight ago also made a statement at a large producer gathering near Brisbane suggesting a need to build a supply of grainfed cattle to fill a forecast shortage around January.

The next ALFA/MLA quarterly survey for the September quarter could make interesting reading, although its timing may fail to capture the intake activity that has occurred through early October, reliable contacts say.      

Beef Central’s latest feedlot trading budget follows a sequence of steadily improving results, coming on top of an ‘all-square’ result three weeks ago; a minus-$21 result a fortnight before that; and -$41 towards the end of August.

That’s a long way from some of the horrific results experienced last year when figures drifted towards losses close to $100/head on typical Darling Downs 100-day grainfed cattle.   

Yesterday’s result was the first time the calculation has been in positive territory since a couple of modestly positive trades back in April/May. Interestingly, our equivalent October steer placement calculations around this time last year were also in the black, but only to the tune of $6 and $1/head.

For yesterday’s trading budget, we’ve nominated a feeder steer buy price at 185c/kg, down 5c/kg on three weeks ago, based on a flatback crossbred steer, ex-Darling Downs. There are variable quotes in the market at present for such cattle, some drifting as low as 180c – particularly given dry weather pressure in northern NSW – but that appears to apply for feeders with a little more content involved.

Current feeder steer prices for all descriptions remain delicately poised, however, and much will depend on weather patterns over the next month or two.

The 185c/kg value chosen as our representative feeder price for this week’s trading budget values him at $832, down $23 on three weeks ago, and minus $45 from as recently as early September. It’s also a considerable distance from our January 9 year-high steer value of $967.

Influenced by current grain prices and stocks on hand, finished ration price applied in yesterday’s calculation remains at $275/t. However, indications are that with new season crop coming in, prices may move higher on that figure – possibly $10-$15/t north.

The current finished ration price represents a total feeding cost over 105 days of $430 on our example steer, and a total production cost calculated at $1354, back $23 based on the softer feeder steer value.

Cost of gain, using our chosen variables (210kg gain over 105 days) stays at 205c/kg yesterday (more on relative cost of gain below). This time last year, the cost-of-gain was 190c/kg, on a ration price of $255/t.  

All the above variables deliver a current breakeven yesterday of 384c/kg dressed weight on a 100-day feeding exercise, down from 390c/kg three weeks ago.

Current public grid prices from Southeast Queensland processors for January, week four, are around 390c/kg, delivering a $21 profit trading budget outcome this week.

It might not be saying much, given the trading conditions experienced over the past few years, but it’s in fact the biggest profit ever recorded since Beef Central started this calculation back in May, 2011.

Apply typical meatworks grid downgrades on shortfed cattle, and that budget could still easily be in little better than breakeven, however.

Looking back, in the equivalent Beef Central trading budget from this time last year, the breakeven figure was 388c. Feeder cattle back then were around 195c/kg, and ration price, $255.

Spot market position

Forward contracts on cattle exiting the feedlot today, and bought forward in early July were around 380c. Breakeven on those cattle was around 390c, suggesting the processors/traders are currently in the money, to the tune of about $35/head on those cattle.

COG versus feeder price

Following on from our discussion about cost-of-gain versus feeder price in our last breakeven report, we prepared the graph published on this page to show the fluctuations that occur over a yearly cycle, and extending back to when Beef Central was launched in May last year.  

It illustrates that the COG figure is currently well above the c/kg cost of the feeder animal.

Total cost at the end of the feeding cycle is the combination of the buy price and the feeding COG. Consequently, if an operator has a high buy price, but a lower cost of gain, they can continue to feed cattle longer. Assuming the feedlot can continue to extract performance, this means the longer the beast is fed, the better the comparative profit – up to a point.

In practical terms, what that means is that steers that might go into the feedlot at around 380kg for a heavy domestic program might be fed-on for an additional 20 days or more to make export weights – especially with the use of back-to-back HGPs

But when the situation is as it is at present, where cattle are cheaper than the cost of gain, there is a tendency to want to feed those cattle for the minimum number of days possible. That’s because every additional day represents less comparative profit.

Some say this may heighten demand and price for feeders that more closely match intake weight requirements, or conversely, reduce demand for those that don’t. It also enhances the scope for backgrounding roles in the grainfed supply chain. 

In the US industry, however, where corn is (normally) abundant and (normally) relatively cheap, the same fluctuations are not so obvious. COG is typically lower than feeder price on a consistent basis in US yards, sources say.

• 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 356kg dressed weight; ADG of 2kg; consumption 15kg 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.