Grainfed trading budget blows-out, as feeder and ration prices rise

Jon Condon, 06/03/2014

Rises in feeder cattle prices following recent rain across some parts of Eastern Australia, together with further lifts in ration price have combined to shift results further into negative territory in Beef Central’s latest grainfed trading budget calculated this morning.

Today’s trading budget calculation is based on our standard set of variables (see full list at base of page), benchmarked on a typical flatback 450kg feeder steer going on feed on the Darling Downs today, and closing-out after 105 days on June 19.

It suggests a minus $49 result on our typical flatback steer going on feed today, on top of a negative-$36 result a fortnight ago, and progressive deterioration since early this year, when the trade got within $6 of breakeven.

For today’s budget, we’ve lifted our flatback feeder steer price ex Darling Downs another 5c, to 185c/kg, through tightness in supply of suitable feeder cattle in NSW and southern Queensland since earlier rain. Certainly there are bids in the market above that, and equally, examples of saleyards cattle fitting our spec being bought at a lower level, by 185c is currently middle-ground.

One influence is that there are a now a lot fewer northern higher-indicus cattle heading south to come onto feed, partly due to live export pressure and some localised rain relief. In spite of that, there appears to be little or no respite in the amount of custom-feeding currently taking place in those Downs yards that offer a service. This appears to be taking a little competition out of the Queensland feeder market at present.

In contrast, in southern areas, there’s been examples of heavy feeder steers, mostly blacks, making up to 200c/kg this week. Across all regions, feeders have probably firmed 10-15c/kg in the past week or two.

The trend is clearly evident in the EYCI which closed yesterday at 316.25c, up 8pc on a week ago.

Pricing our feeder steer for today’s trading budget at 185c/kg values him at $830, up $20 on a fortnight ago, but still $35 cheaper than the market back in late November, when tightness of supply was evident.

It’s a long way better than a record-low 150c/kg liveweight in our budget back in in early June last year, when the steer was worth only $675 due to drought supply pressures. That’s a $155 difference since.


Ration price up $5/tonne

There’s been no relief from recent hikes in feedgrain price, with finished ration price allocated to today’s grainfed budget rising again to $375/t, a new record for this set of calculations, tracing back as far as May 2011. It also appears to be the highest price seen since around 2008, when global grain prices sky-rocketed.

Downs custom feeders are currently offering ration quotes anywhere from $370/t and $390/t, depending on ingredients, processing method and likely performance.

Evidently more spot grain price is creeping into the ration price mix, causing the latest adjustment. Barley and wheat are currently around $340/t ex Downs, with virtually all supplies being drawn from southern growing areas, and carrying a freight component in some cases up to $100/t.  

The current ration price represents a $35/t rise since mid-December as drought pressures have impacted on grain, and that’s unlikely to change as long as feedlots remain as full as they currently are.

The current ration cost represents a total feeding cost over a 105-day program of $587, up another $7 since last time, and $55/head more than mid-December’s rates.

This, combined with the current feeder price, gives a total production cost of $1502, about $20 more than last time, influenced by the rise in feeder and ration price.

Cost of gain, using our chosen variables (2kg/day ADG, for 210kg gain over 105 days) now sits at 276c/kg, 11c/kg higher than our mid-January budget. The cost of gain this time last year was 230c/kg, with rations at $310/t.


Breakeven hits new record

The combination of the above inputs delivers a breakeven figure in today’s budget of 429c/kg – 9c/kg higher than on our last calculation a fortnight ago, due to the higher feeder/ration cost, and easily another record for our budget.

The last time it got remotely close to that figure was back in November when feeder prices got to 190c/kg briefly. The only other times it has come close to today’s figure was in early 2012, when breakevens got to 412c during a period when feeders went to 215c/kg, and a brief slot during winter last year when the number touched 400c.


Forward pricing lifts to 415c/kg

Based on Southeast Queensland processor quotes yesterday, the forward price for 100-day flatbacks going on feed today and closing-out in June, week-three, is 415c/kg, up 5c from last time. The last time we saw +400c for 100-day ox was back in 2011 and briefly during the first week of 2012.       

All that delivers a trading budget result of minus $49 on a 100-day feeding program starting today. The strength in the underlying export meat market, however, certainly appears to have the capacity to support those higher breakevens. But until we really see a tightening in cattle supply, it’s hard to see livestock pricing truly reflecting the strength in the export meat market.   

The current spot market for 100-day cattle across southeast Queensland processors is around 405c-410c/kg. But if cattle were shorter in supply, it’s easy to see that at 420c/kg, and a 430c/kg quote out in front is conceivable. In theory, that would leave our trading budget proposition much closer to breakeven, if not above it.

Looking at finished grainfed cattle forward-bought by processors back in December at contract prices around 400c/kg, they a little below today’s spot grid price slaughter market rate at around 405c. That leaves processors 5c/kg, or about $18 in front on those December-bought forward cattle, than what they are paying in today’s spot market.

Keep in mind, though, that there was plenty of speculation late last year that finished GF cattle might be in the mid-400s by now, given a decent wet season, and that tended to push up forward price at the time. Unfortunately that hasn’t happened, but the encouraging sign is that feedlots have only just started to compete more vigorously for feeder cattle again.   


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.


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