Lotfeeding

Grainfed trading budget outcome drifts further from profit

Jon Condon, 06/08/2013

 

The prospect of placing cattle on feed for 100-day programs drifted a little further from profitability in Beef Central’s latest grainfed trading budget calculated this afternoon.

It’s not quite a fortnight since our last budget calculation on July 25, but Beef Central will be busy imbibing in industry banter during Brisbane show later this week, so it’s now-or-never.

The key inputs of feeder price and ration price remain unchanged from our last calculation done 12 days ago, while finished forward steer selling price has slipped a little since last time.

Using our chosen set of variables (see full list at base of page), the forecast loss on a flatback steer entering the feedlot today and closing-out after 105 days on feed in November, week three, is $66.

That’s $17 worse off than our last calculation almost a fortnight ago, and a big gap from a $4 net profit posted on the same exercise calculated as recently as May 16.

Pricing on our feeder steer for the latest trading budget is particularly problematic, with a lack of clear signal in the market. As our trade is based on a steer purchase ex Darling Downs, we’ve decided to keep the purchase price unchanged at 170c/kg, but there’s plenty of evidence of similar steers fetching much higher prices south of the border.

The 170c/kg price ex southern Queensland may in some cases include a percentage of higher grade Indicus cattle.

In fact a number of NSW operators are being forced into the Queensland market currently, because of the price disparity, and perhaps paying rates higher than 170c/kg for the lead of the Queensland cattle.

So just how big is that north/south differential at present? Opinions vary, but some market participants said it was a ‘good’ 10c/kg liveweight, and more in places. But the point is the volumes of feeder-type cattle just aren’t there in the south currently.

A handy indicator of the north V south price disparity can be gained from today’s Eastern Young Cattle Indicator daily summary report issued by NLRS (click here to view).

Dividing up today’s reported sales into ‘north’ (Inverell, Roma and Warwick) and ‘south’ (the rest) shows a dramatic difference, in average c/kg (carcase weight) price between the two – 313.45c versus 345.99c – a whopping 32.54c/kg cwt, or 10 percent price difference.

No wonder feedlot trucks are heading north to pick-up flatback feeders.

Using an example of a Tamworth district feedlot buying steers out of Roma, the breakeven on buying those steers out of the north, rather than locally, is 11c/kg, liveweight, or $50 a head. That’s based on a transport stocking density of 26 to the deck for 400kg steers; a freight rate of $1.80/deck/km; and a transport distance of 709km.

Southern grainfeeders aren’t showing great interest in Queensland’s cheaper higher indicus types, however.

Getting back to today’s trading budget, apportioning a feeder price of 170c/kg values our steer at induction at $765, down $22 on five weeks ago, but considerably improved from a record-low 150c/kg liveweight in our budget three months ago when the steer was worth only $675 due to drought supply pressures.

Ration price unchanged

Ration cost has been retained for yesterday’s budget at $330/t, a record-equalling high for our report, since it started in May 2011. There’s a suggestion that ration price might start to wane in coming projections, however, because new-season crop will start to come into ration calculations, whereas today’s is still based on old-season grain.

A $330 ration cost applied yesterday represents a total feeding cost over 105 days of $517. This, combined with the current feeder price, gives a total production cost of $1372, down $26 on five weeks ago.

Cost of gain, using our chosen variables (2kg/day ADG, for 210kg gain over 105 days) remains unchanged at 246c/kg. This time last year, the cost-of-gain was around 200c/kg on a $280/t ration price, and a feeder price of 200c/kg.

The above inputs suggest a breakeven figure in yesterday’s budget of 389c/kg – the same as a fortnight ago, but a 7c/kg decline from our previous calculation on July 2.

Forward pricing

Current forward public grid prices for 100-day ox from Southeast Queensland processors for November 19 close-out, have softened a little since our last calculation. Public bids obtained today were around 370c/kg dressed, down 5c on our July 25 figure, and cattle are being sold forward at those rates.

Some of those may be higher grade Indicus cattle, however. Pricing those steers as feeders at 150c, however, and they are turning a $26 profit, according to our trading budget formula.  

The softer 370c/kg forward sale price applied today is due mostly to the continued high flow of western and northern cattle into Queensland feedlots, as there is no real sign of a seasonal turnaround from earlier this year, meaning processors are not having to work quite so hard to secure a grainfed export kill.

Reports suggest it is still nigh on impossible to find pen space in any reputable Queensland feedyard at present, as drought pressures continue. Close-out pens are inevitably re-filling overnight, as making more space for weaners still looks a pretty good strategy for many western and northern cattlemen. 

As mentioned in our intro, the variables outlined above deliver a $66 loss on our trading steer, $17 worse off than the $49 loss figure a fortnight ago. 

But the proviso on that is that with the seasonal influences that normally come into play from November kills onwards, as well as the strong export market outlook and lower A$, there is every likelihood that those forward prices will rise.  

Looking back at 100-day flatback cattle that went on feed back at the end of April for slaughter this week, forward-contract meatworks rates then were around 355c/kg. The market for spot 100-day cattle in Southeast Queensland is more like 370c/kg. On that basis, processors buying those cattle forward were about $55 better off than they would have been buying those same cattle out of today’s spot market.

 

Reader feedback:

Roma reader George Schwennesen recently offered the following comments on Beef Central’s fortnightly grainfed trading budget:

“We currently have steers/bullocks in a feedlot and our experience correlates very closely with the information provided in today's article. It's slim pickings for producers with 100 or 200 head that need finishing. Have made Beefcentral my opening page ever since you started and I get information not available anywhere else. Keep up the great work.”

 

  • 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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