Higher grain costs and a softening in exit price have impacted negatively on Beef Central’s latest 100-day grainfed trading budget, calculated today.  

The latest fortnightly breakeven has projected a loss of $38 a head, $20 worse than a fortnight ago, for flatback steers entering the feedlot yesterday and closing-out on March 13 next year after 105 days on feed.

The result represents a gradual deterioration compared with a positive $5 trade four weeks ago and +$21 projected profit back in mid-October.

For yesterday’s trading budget, the prescribed flatback feeder steer buy price ex Darling Downs has drifted south again, easing 5c to 185c/kg.

There are bids evident in the market for feeders matching our description from 180c through 190c at the moment, and possibly above that for large runs of suitable cattle.

Current feeder steer prices for all descriptions remain delicately poised, however, and much will depend on weather patterns in the run through to Christmas.

Comparing EYCI with QCMI

It’s worthwhile pausing for a moment to compare today’s steer price (185c) with the current downward pressure being seen on the Eastern Young Cattle Indicator, which this week fell to two-year lows around 331c/kg.

The Queensland Cattle Market Index figure, in contrast, has held up much better in value. While the QCMI (built more around slaughter-based and heavier cattle) could not be described as robust at present, it still sits around 181c.

Since July, the QCMI has gone from 199c to 182c (an 8.5pc decline), whereas the EYCI over the same period has gone from to 390c to 331c (15.2pc decline).

That reflects the point that the QCMI is based on a summer-rainfall dominant market, while the EYCI is relatively more influenced by winter/spring rainfall. While Queensland has been partly affected by the absence of good spring rain, the impact was much more evident and more serious in NSW, and that is clearly reflected in the EYCI’s recent performance.

The result has also been seen in the big flow of cattle into southern Queensland feedlots over the past eight weeks.     

Yesterday’s breakeven steer value of 185c/kg prices him at $831, back $23 on two weeks ago, and $135 less than what he was worth back in January – the high-point for the year for feeder price of $967.

Ration price for this week’s trading budget have been adjusted upwards $5/tonne to $290/t.

That reflects the lack of downwards on grain price during this year’s harvest, unlike what traditionally happens at this time of year. The absence of that normal seasonal dip this year is probably driven by continued high international grain prices.

Secondly, the fact that Downs feedlots are now pretty full, and close to capacity in some examples has probably meant feedgrain buyers have had to be more bullish in their buying strategies, which has probably assisted in holding the market up.  

An ‘expectation’ of a decline in grain prices was starting to be seen in softening feedlot ration prices going back into September/October, but when this year’s harvest started to come off, when some of the old-season cheaper grain was exhausted, with rations starting to be priced 100pc on new grain, market-to-market, there was a resulting lift in ration price.

While Beef Central has applied a $290/t ration price in its latest calculation, ration prices above $300/t are currently not uncommon in some Downs feedlots. Due to the higher occupancy rates now being enjoyed, some feedlots may be again expanding their margin/mark-up on their ration charge, having taken a hit on margin earlier when occupancies were lower.     

The current ration price represents a total feeding cost over 105 days of $454 on our trading steer, up $8 from a fortnight ago. Total production cost is calculated at $1378, back $16 on mid-November’s feeding budget figure, due to lower feeder price more than offsetting higher ration price.

Cost of gain, using our chosen variables (2kg/day ADG, for 210kg gain over 105 days) has gone up a little to 216c/kg yesterday, +3c/kg, in line with higher ration price. This time last year, the cost-of-gain was 187c/kg on a 250/t ration price, about $40 or 16pc different from today’s figure.

Feeders back a year ago were worth 210c/kg, however.

All the above variables deliver a breakeven yesterday of 391c/kg dressed weight on a 100-day feeding exercise, down from 395c/kg a fortnight ago, due mostly to lower cattle price.

Current public grid prices from Southeast Queensland processors for March, week two, are around 380c/kg, down 10c on two weeks ago, representing a trading loss on the current proposition of minus-$38.

That shift in forward contract price reflects the current rise in numbers of cattle currently on feed, and coincides with a reduction in processing capacity in that period early next year, with one large grainfed processor in southern Queensland likely to be on annual maintenance closure.

Spot market position

Forward contracts on cattle exiting the feedlot today, and forward-bought in mid-August were around 385-390c. Breakeven on those cattle was around 400c, suggesting processors/traders are technically losing about $30/head on those cattle. However that result may have in fact edged a little into the black on some cattle, based on the recent better feedlot performance during spring.

• 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.