Discussion: Feedlot capacity issues loom, as ‘Wagyu factor’ sets in

Jon Condon, 07/04/2022

THE Australian feedlot industry may be on the cusp of another surge in built capacity – partly influenced by the growing number of Wagyu cattle on feed.

Wagyu are in fact responsible for bending occupancy in Australian feedlots in two ways: they typically spend 400 days (in the case of F1s) or 500 days (in the case of Fullbloods) in pens, and there are simply more Wagyu being fed now, in more feedlots, that there were three or four years ago.

In the case of one large southern Queensland feedyard, embracing more Wagyu feeding has blown-out the business’s average days on feed from around 110 days (when the yard principally fed a mixture of 100/120 day cattle and domestic cattle) to 160 days.

A second large Queensland feedlot business now has 40 percent of its inventory as Wagyu, doubling the average days on feed this year to more than 200 compared with a few years ago.

It means that pens are being tied-up for far longer than they once were, leaving fewer available spaces for other domestic or 100-day type cattle.

Another prominent Queensland lotfeeder told Beef Central that longer days on feed in his business had meant that it had turned over only a handful more cattle last year, than it did back eight or nine years ago, before undertaking expansion.

“Our average days on feed are now out to 160, where they used to be 99,” he said.

“It means that it’s no longer appropriate to simply look at the industry’s one-time feeding capacity – that figure also has to be considered in the context of average days on feed.”

“A large Queensland yard like Lillyvale, near Condamine, for example, which once fed for a large 60-70 day Woolworths contract, now feeds mostly Wagyu cattle for 400+ days. Lillyvale has doubled its capacity, but is probably turning over less cattle each year now than it did before expansion. It’s a big trend.”

Future expansion

Another large lotfeeder spoken to for this report said his belief was that industry had now already built the ‘easy stuff’, in terms of opportunities to further expand capacity.

“It means the next phase of growth is likely to be more expensive, on a per head basis,” he said.

“I can see industry capacity getting to 1.6 million head fairly easily and quickly, but it will be harder and more expensive beyond that.”

“One of the key limiting factors now is sites with good, permanent, adequate water. Having water available nine years out of ten is just not good enough, where feedlots are concerned,” he said.

“For this reason a number of stakeholders are currently considering new 20,000 head feedlots, but nothing bigger, because of the water access and reliability issue.”

Nobody in their ‘right mind’ would build feedlot capacity simply to service requirements during the next drought – but the fact is, the grainfed industry has filled that important role in the past, providing a huge finishing paddock.

He said rapidly rising construction costs being seen right across Australian industry would inevitably affect feedlot construction costs this year. While valuations were often less, it could cost as much as $2500/head capacity to construct a large new feedlot today, he suggested.

A mooted feedlot sale currently being finalised may give some guidance over what the market currently values feedlot infrastructure at.

Historically, investment in feeding capacity expansion in Australia has come in ‘waves’, when conditions or demand are more favourable.

Beef Central is aware of a number of expansion projects – either new greenfield sites, or additions to existing yards – that are currently in early stages of planning or development. Stay tuned for a report in coming weeks if and when they are locked-down.

Having said that, feeding capacity has continued to rise steadily over the past five years. In the December quarter, overall industry capacity reached a new record high of 1.453 million head, a moderate 8400 head (0.6pc) rise on the year before.

What happens when it gets dry?

Beef Central spoke to one prominent Queensland feedlot operator, who said he thought there was not going to be enough feeding capacity, going forward.

He also raised concerns about access to surplus capacity, the next time seasonal conditions turn bad across extensive grazing areas.

“In the past, in a drought, the industry has always had this surplus feedlot capacity to fall back on,” he said. Australian feedlots had played a crucial role in drought mitigation, in providing a channel for finishing young cattle that would have otherwise been grown out on grass.

But increasingly, larger commercial feedlots no longer operate for lengthy periods at sub-optimal occupancy. Wagyu feeding has played a strong part in that, as has the popularity (and financial advantage) of ‘program’ style branded grainfed beef business.

Feedlot occupancy has remained unusually high over the past four years, through both the drought cycle and the period of above-average seasons which have followed it.

The Australian Lot Feeders Association no longer routinely reports occupancy levels in its quarterly survey results, but using successive December quarter statistics as an example, occupancy last year (calculated as a percentage on numbers on feed versus reported feedlot capacity) reached 81pc in the December quarter, despite the abundance of green feed in paddocks across fee eastern and southern Australia.

In practical terms, lotfeeders in the past have suggested that anything much above 90pc occupancy represents ‘full utilisation’ for the industry, because of maintenance, pen cleaning between intake cycles and other factors.

Over the three years prior, December quarter occupancy across Australia was 75pc in 2020 – clearly influenced by drought’s heavy impact on feeder cattle availability; 90pc in 2019, and 86pc in 2018.

Note that these figures can be interpreted as being conservative, because the capacity side of the quarterly report is provided from AusMeat’s NFAS records, and includes a large number of small opportunity-style feedlots that drift in and out of grainfed production. Many may not have been actively feeding at all during this reporting period, pushing reported ‘occupancy’ numbers artificially low.

As national herd recovery continues and a greater proportion of young cattle continue to get directed into yards as feeders, occupancy pressure is unlikely to ease, one lotfeeder said.

Rising feedgrain prices, and already higher feeder prices could challenge some investors’ appetites for expansion, however.

“While young cattle are as dear as they are, it’s hard to imagine big investment in capacity taking place. Feeder prices would have to moderate for that to happen, in my opinion,” he said.

“The gross margins on feeding 100-day cattle over the past few months have been poor. Feeder cattle price is the biggest impact, but barley is currently around $360/tonne, delivered downs, and feed wheat $400/t – up towards the highest the industry has ever paid.”

“That environment, alone, is not really conducive to more capacity construction. Wagyu feeders are currently worth north of $10/kg – that’s $4000, going into feed. Flatback feeders are 550c, or more than $2000. It wasn’t that long ago we were getting $2000 for a finished 100-day ox.”

“Cattle price will be the limiting factor in future expansion.”




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  1. Andrew Loughnan, 07/04/2022

    Where is the market evidence of a feedlot being acquired on a financial basis (rather than the archaic $/SCU)?

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